As per reports, the meeting was attended by representatives of all states and held deliberations via video conferencing on ways to make up for the shortfall in states' revenues. While speaking at the meeting, Pandey said that GST collection has been severely impacted this year, due to COVID-19 pandemic. "As per GST Compensation Law, states need to be given compensation," he said.
"Compensation gap which has arisen this year (expected to be Rs 2.35 lakh crores), is due to Coronavirus as well. The shortfall in compensation due to the implementation of GST has been estimated to be Rs 97,000 crores," he said.
"AG's clear opinion was that compensation gap cannot be met from India's consolidated fund. Option 1 presented to GST Council was to provide a special window to states, in consultation with RBI to provide Rs 97000 crores at a reasonable interest rate," Pandey said.
"Option 2 presented to GST Council was that the entire GST compensation gap of Rs 2,35,000 crore of this year can be met by states, in consultation with RBI. These options will be sent to states for a view within 7 Days & will apply for this fiscal year only," the Finance Secretary added.
Meanwhile, Finance Minister pointed out that states have asked the Finance Ministry to give 7 working days to think about the options. "These options would be available only during the current year, the situation would be reviewed next year. We may have another GST meet soon," Sitharaman said.
"Once the arrangement is agreed upon by GST Council, we can proceed fast and clear these dues and also take care of the rest of the financial year. These options will be available only for this year; in April 2021, the Council will review &decide action for 5th year," Sitharaman said.
Revenue Secretary also pointed out that the annual GST compensation requirement is estimated to be around Rs 3 lakh crores, and cess collection is expected to be around Rs 65,000 crores, leaving us with an annual compensation gap of Rs 2.35 lakh crores.
He said that during April-July 2020, total GST compensation to be paid is Rs 1.5 lakh crores, this is so because there was hardly any GST Collection in April and May.
On being asked about GST cut for two-wheelers during the media briefing of 41st GST Council meet, the Finance Minister said that two-wheelers may merit to go to the GST council for a consideration.
Sitharaman also stated that the government will give a further relaxation of 0.5 per cent in states' borrowing limit under FRBM Act.
"Government will give a further relaxation of 0.5 per cent in states' borrowing limit under FRBM Act as 2nd leg of Option 1. States can choose to borrow more, beyond expected compensation itself, since that is the injury caused by," FM added.
In the meeting, it was decided that the repayment of loans, including interest payments, will be made through the cess collected from 6th year onwards. "In no case, states will be burdened i.e they will not have to tap into other sources of revenue for loan repayment," Revenue Secretary said.