New Delhi, August 29: The Centre on Saturday assured states to clear their Goods and Services Tax (GST) dues despite the financial crunch as the GST collection reduced due to the COVID-19 pandemic. The Central government also wrote a letter to the states to communicate two borrowing options. The dues will be cleared as per the two borrowing options. A meeting of State Finance Secretaries with the Union Finance Secretary and Secretary (Expenditure) is scheduled to take place on September 1, 2020, for clarifying issues. Finance Minister Nirmala Sitharaman Says ‘COVID-19 an Act of God, May Lead to Contraction of Economy’.
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The two borrowing options are - the states will not be required to repay the principal from any other source, and the states will not be required to service the debt or to repay it from any other source. The meeting will be held to discuss two options that the Centre proposed during the 41st Annual GST meeting headed by Finance Minister Nirmala Sitharaman. The finance minister said, “The two borrowing options to meet the GST Compensation requirement for 2020-21 consequent to the discussions in the 41stmeeting of the GST Council held on August 27, 2020, has been communicated to States, as per the document attached with this press note, to communicate their preference within seven working days.”
On Thursday, Sitharaman chaired the 41st GST Council meeting and said that GST collection had been severely impacted due to coronavirus pandemic this year. Calling COVID-19 an "Act of God", The Finance Minister said, "...This year we are facing an extraordinary situation. We are facing an act of God where we may even see a contraction." GST Council Meeting Highlights: 'Act of God' Behind Economic Slump, Says FM Nirmala Sitharaman, States Given 7 Days to Revert on Compensation Gap Issue.
The Union Minister even gave the states seven days to get back on filling the compensation gap of Rs 2.35 lakh crore and hinted brief GST Council meeting soon. The government told the stated that it would facilitate talking with RBI and help to get G-security linked interest rates so that each state does not have to struggle for loans.