- The Union Budget is for February 1st
- Finance Minister with preparations
Prior to the presentation of the budget, Finance Minister Nirmala Sitharaman had been in talks with various shareholders since December 15. Talks have also been held with state finance ministers ahead of the budget.
The states have asked the finance ministry to extend the GST compensation, citing the worsening economic situation due to the Kovid crisis. Compensation was set to last until June 2022, but many states have demanded that it be extended for more than five years. Other crises include loss of income due to Kovid and rising public debt.
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In a pre-budget meeting with the finance minister, several states have asked the government to increase the state’s credit limit and help with rising capital expenditure. Along with Kerala, Rajasthan, Tamil Nadu, Chhattisgarh, West Bengal and Delhi have also demanded an extension of the GST compensation period.
Chhattisgarh Chief Minister Bhupesh Bagel has said that states have lost revenue due to the implementation of the GST tax system. The states are likely to lose about Rs 5,000 crore in revenue in the coming year. The Center has not made any special arrangements to make up for the loss. It is in this context that the states are demanding an increase in the GST compensation grant. It is argued that compensation should continue for the next five years after June 2022.
Compensation was announced for five years after the implementation of GST on July 1, 2017 to offset the loss of revenue to the states. For this, compensation cess was imposed on luxury items.
However, most states point out that their tax revenues are low and that they would be in crisis if they did not receive assistance.
The states have asked the finance minister to take steps to offset the financial loss caused by Kovid and to reduce tax rates.