Expect To Pay Back GST Compensation Loans Earlier, Says Nirmala Sitharaman
The continued collection of compensation cess was to service debt undertaken to pay GST compensation to states during the pandemic, she said.
![<div class="paragraphs"><p>Finance Minister Nirmala Sitharaman. (Photo: Nirmala Sitharaman/X)</p></div>](https://media.assettype.com/bloombergquint%2F2024-02%2Fb5ee5fd4-0aff-4a89-989f-8dd93545f4bb%2FFM_Nirmala_Sitharaman.jpeg?auto=format%2Ccompress&w=200)
Finance Minister Nirmala Sitharaman said that states were not being discriminated against regarding their dues.
"The apprehension that some states are being discriminated against is a politically vitiated narrative," she said while answering questions on the devolution of direct taxes and Goods and Services Tax share to states on Monday.
In her response to a question by Lok Sabha member NK Premchandran, Sitharaman said that the GST law on compensation expired as of June 30, 2022. "Meaning giving compensation to fill the gap between assumed income and shortfall has come to an end as of June 30, 2022."
The continued collection of the compensation cess was only to service the debt (and its interest) undertaken to pay GST compensation to states during the Covid-19 pandemic, when collections were low, she said.
"With the advice of the Attorney General of India, the council took a decision to extend collecting compensation cess till such a time that the borrowed money and the interest that has to be paid to it are repaid," Sitharaman said.
The compensation cess that is being collected now, beyond 2022, is only for that point and will also technically come to an end by March 31, 2026, according to the minister. "Hopefully, we will be able to pay it back even earlier. Any extension of paying compensation beyond the amount (for) which it is being borrowed is not envisaged in the act."
Finance Secretary TV Somanathan also hinted that the payment duration for settling GST compensation loans might be shorter.
The lower gross borrowing target budgeted for FY25 also comes on the back of expectations to repay some of the maturing debt through the Goods and Services Tax Compensation Fund, according to the budget documents presented on Feb. 1.
The government aims to lower its fiscal deficit level to 5.1% of GDP in FY25, easing the pressure to reach the goalpost of 4.5% by FY26. According to revised estimates, FY24 is expected to end with a fiscal deficit of 5.8%, which is revised downward from the FY24 budget estimates of 5.9% of GDP.