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GST Council Meet: Compensation Gap Stands at Rs 2.35 Lakh Crore for FY 2020-21 Amid COVID-19 Pandemic, Centre Places 2 Options Before States

41st GST council meeting. (Photo Credit: PIB)
41st GST council meeting. (Photo Credit: PIB)

New Delhi, August 27: Union Finance Minister Nirmala Sitharaman on Thursday chaired the 41st Goods and Services Tax Council Meeting. During the meeting, the council estimated the compensation gap at around Rs 2.35 lakh crore in GST collections due to COVID-19 pandemic.

Addressing the press conference, Revenue Secretary Ajay Bhushan Pandey stated that the total shortfall in collection of GST is estimated at Rs 2.35 lakh crore, out of which Rs 97,000 crore is on account of GST shortfall while the rest is due to COVID-19 pandemic.

Following this, the Union Finance Ministry gave the states seven days time to get back on filling the compensation gap of Rs 2.35 lakh crore and hinted brief GST Council meeting soon. The Union Ministry also gave two options for states to fill the compensation gap.

The first includes a special window which can be provided to the states, in consultation with the Reserve Bank of India, at a reasonable interest rate for the borrowing of Rs 97,000 crore. The amount can be repaid after five years (of GST implementation) ending 2022 from cess collection. While the second option is to borrow the entire Rs 2.35 lakh crore shortfall under the special window.

Apart from this, the Union Ministry stated that it will provide a further relaxation of 0.5 per cent in states’ borrowing limit under Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act, 2003). With this, states can choose to borrow more, beyond the expected compensation itself, since that is the injury caused by COVID-19.

Among other details, Union FM Revenue Secretary said that there was hardly any GST Collection in April and May. Adding more, he said, “Total GST compensation during April-July 2020 to be paid is Rs 1.5 lakh crores.” The Union Ministry informed that Centre released more than Rs 1.65 lakh crore as GST compensation to states for FY 2019-20, including Rs 13,806 crore for March.

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Finance Process & Business Expansion Startup Strategy

Emergency Credit Facility Under ECLGS for Small Businesses Hiked From Rs 25 Crore to Rs 50 Crore, NCGTC Modifies Operational Guidelines

MSME (Photo Credits:
Emergency Credit Facility Under ECLG for small businesses hiked from Rs 25 crore to Rs 50 crore by NCGTC. | Representational Image.

New Delhi, August 12: The National Credit Guarantee Trustee Company Ltd (NCGTC) on Wednesday issued a circular regarding the modification of operational guidelines for Emergency Credit Line Guarantee Scheme (ECLGS). The common trustee company informed that the new operational guidelines will now cover individuals and more enterprises amid the COVID-19 pandemic.

Informing about the minutes of the modification of operational guidelines for ECLGS, the NCGTC stated that the upper ceiling of loans — outstanding as on February 2, 2020 — has been increased under the scheme from Rs 25 crore to Rs 50 crore. Apart from this, there has been a hike in the upper ceiling of annual turnover from Rs 100 crore to Rs 250 crore. This has been done in line with the increased ceiling of loans outstanding and revised definition of MSME issued by Union Ministry of MSME.

Among other details, the NCGTC circular stated that there has been an increase in the maximum amount of NCGTC to Member Lending Institutions (MLIs) under the ECLGS. The amount limit has been raised from Rs 5 crore — at present 20 per cent of Rs 25 crore — to Rs 10 crore, which is 20 per cent of Rs 50 crore. However, it has been made clear that those individual loans given for business purposes should fulfil the eligibility criteria prescribed under the scheme.

NCGTC Circular Regarding the Modification of Operational Guidelines for ECLGS:

Earlier on May 23, 2020, the NCGTC was set up by the Ministry of Finance’s Department of Financial Services as a common trustee company to manage and operate various credit guarantee trust funds. It was incorporated under the Indian Companies Act, 1956 on March 28, 2014, with a paid-up capital of Rs 10 crore.

Under the NCGTC, five trust funds currently operate:

1) Credit Guarantee Fund for Skill Development (CGFSD
2) Credit Guarantee Fund for Education loans (CGFEL)
3) Credit Guarantee Fund for Factoring (CGFF)
4) Credit Guarantee Fund for Micro Units (CGFMU)
5) Credit Guarantee Fund for Standup India (CGFSI)

The NCGTC was launched ECLGS on May 23, 2020, for all the financial institutions of India. Among the four key points, which differs it from other schemes include — 100 per cent credit guarantee, zero guarantee fee for banks and customers, pre-approved loans and minimum bank’s risk weight allocation. However, the scheme will continue till October 31, 2020, or till the time Rs 3 lakh crore of the loan amount is sanctioned. The NCGTC has also made it clear that borrowers must be GST registered wherever it is necessary.