The Goods and Services Tax (GST) Council's two-day meeting has ended in Chandigarh with no decision on extending the compensation window to the states. The next GST Council meeting will be held in August.
The Opposition as well as some BJP-ruled states have been demanding an extension of the 5-year compensation window that expires on June 30.
Union Finance Minister Nirmala Sitharaman said: "A few states before lunch today said that they would like the compensation to continue for some time. Even as a few other states said, yes, it is a question of coming out of the pandemic but yet we need to have states also stand on their own. How long can this go on and so on. They were broadly statements being to the sense of compensation can be continued, if not for five years, at least for a few years. So, they were that kind of input on the compensation cess."
The Opposition-ruled states have also cited a recent Supreme Court ruling indicating decisions made by the Council are not binding and states need not stick to them. The ruling by the SC has been seen by some as states having powers to determine taxation.
Chhattisgarh Finance Minister TS Singh Deo said the present formula for equally splitting revenues from the GST between the Centre and states should be changed, with a larger share of 70-80 percent being given to states.
Kerala Finance Minister KN Balagopal said the GST compensation mechanism for states should be extended to make good the revenue loss.
Even states like Uttarakhand and Pudduchery, both ruled by Bhartiya Janta Party, have said that they will appeal to Finance Minister Nirmala Sitharaman for relief as their budgets are severely getting hurt.
As per data on revenue growth collated for the Council meeting, only five out of 31 states/UTs, Arunachal Pradesh, Manipur, Mizoram, Nagaland, and Sikkim, registered a revenue growth higher than the protected revenue rate for states under the GST in 2021-22.
Puducherry, Punjab, Uttarakhand, and Himachal Pradesh have recorded the highest revenue gap between the protected revenue and post-settlement gross state GST revenue in 2021-22.