The federal government will prolong a surcharge on taxes on luxurious items together with vehicles and tobacco merchandise past 2022, underneath plans to assist states repay loans raised to satisfy income shortfalls within the present fiscal yr, the finance minister mentioned on Monday. “The GST council has accredited to increase the cess (surcharge) past 5 years,” Nirmala Sitharaman instructed reporters after a digital assembly with state finance ministers. The subsequent assembly of the GST council, comprising central and state finance ministers, could be held on October 12 to work out the main points, she mentioned.
The surcharge on luxurious items, which varies from 12 per cent to 200 per cent, is a part of the nationwide items and providers tax (GST) launched in 2017, and was as a result of expire in 2022.
Tax receipts of the central and state governments fell about 40 per cent year-on-year within the 5 months to August as a result of financial fallout from the coronavirus pandemic.
The economic system is projected to contract by about 10 per cent within the present monetary yr ending in March 2021, non-public economists mentioned, in opposition to the preliminary authorities estimates of about 6 per cent progress.
The central authorities, already going through a shortfall in tax receipts, has requested the states to borrow as much as Rs 1.1 lakh crore ($15.05 billion) from the market within the present fiscal yr ending in March 2021, because the surcharge collections wouldn’t be adequate to compensate them.
Many opposition-ruled states have opposed the transfer, saying it’s as much as the central authorities to satisfy the shortfall by borrowing itself.
“Ten states demand that full compensation ought to be paid to the states through the present yr as per clauses within the regulation and centre ought to borrow,” mentioned Thomas Issac, finance minister of Kerala, referring to the central authorities.
($1 = Rs 73.0890)