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Income Tax Department conducts search operations in West Bengal (Press release dated 10th Dec 2021)

Posted on by Business So Simple in Income Tax

The Income Tax Department initiated search operation in the case of two major manufacturers and suppliers of refined lead, lead alloys and lead oxides on 07.12.2021. The search operation covered 24 premises spread over in the states of West Bengal and Uttar Pradesh.

During the search and seizure action, it has been noticed that these groups are involved in the suppression of taxable income by resorting to bogus purchases and inflation of purchases.

Investigations have categorically revealed that these two groups have booked bogus purchases of around Rs. 250 crore in the name of various individuals, proprietary concerns, and companies. Evidence gathered during the search operation further reveals that stock registers, transport documents, e-way bills etc. have been fabricated to make such bogus purchases. Several accommodation entry providers have admitted that they have supplied bogus bills without supply of material.

The analysis of documents seized from the business premises of one of the groups indicates the modus operandi of over-invoicing during the purchase of raw material in a systematic manner. The differential amount is received back in cash by the key persons of the assessee group. One of the employees of the group has admitted that invoices have been inflated by charging higher prices for better quality of goods than goods actually supplied.

Incriminating evidence in the form of physical documents and digital data indicating unaccounted investments made in cash in immovable properties has also been found and seized.

The search operations have resulted in seizure of jewellery valued at Rs. 53 lakh while four bank lockers are yet to be operated.

 Further investigations are under progress.

Income Tax Department conducts search operations in Gujarat on a prominent group of Surat, engaged in the business of construction of residential and commercial complexes, land transactions as well as real estate financing (Press release dated 10th Dec 2021)

Posted on by Business So Simple in Income Tax

The Income Tax Department initiated search and seizure operation on 03.12.2021 on a prominent group of Surat, engaged in the business of construction of residential and commercial complexes, land transactions as well as real estate financing. The search action covered more than 40 premises spread over Surat and Mumbai.

During the course of the search action, various incriminating documentary and digital evidences have been found and seized including a parallel set of books of account in the case of group entities. The transactions of certain group entities have been found to be maintained in a highly coded manner but were successfully decoded by the search team.  A preliminary analysis of these evidences indicates unaccounted cash receipt of on- money of more than Rs. 300 crore on sale of flats / land which is not found recorded in the regular books of account. Evidences of unaccounted cash infusion by partners, bogus accommodation entry loans by payment of cash and unexplained cash expenses etc. have also been noticed. Further, deeper examination of physical books of account and incriminating evidences seized during the search action shows unexplained investments of more than Rs. 200 crore in real estate and more than Rs. 100 crore by way of loan financing.  

The search action has led to the seizure of unexplained cash of Rs. 4 crore and jewellery valued at Rs. 3 crore while more than a dozen bank lockers have been placed under restraint. The search action has led to the detection of estimated undisclosed receipts and suspicious nature of entries aggregating to more than Rs. 650 crore.

Further investigations are under progress.

Judiciary updates (Income tax)- 09th Dec 2021

Posted on by Business So Simple in Income Tax, Legal awareness

HC deletes disallowance on Account of Slump Sale following its decision for earlier year

PCIT Vs Akzo Noble India Limited (Calcutta High Court) dated 24/11/2021

ITAT deletes addition for cash deposit bank as same were duly explained by Assessee

Sunil Mathur Vs ITO (ITAT Jaipur) dated 01/11/2021

Adjudication of correctness of CA’s report by Disciplinary committee of ICAI, no need once the report passed judicial scrutiny

Wholesale Trading Services P Ltd Vs The Institute of Chartered Accountants of India (Delhi High Court) dated 11/11/2021

Disallowance of expenditure sustainable when assessee unable to prove non-applicability of provisions of section 40(a)(ia)

Ilahia Trust Vs CIT (Kerala High Court) dated 15/11/2021

Penalty not leviable when serious financial constraint prohibited assessee from discharging self-assessment tax

DCIT Vs Karanja Terminal and Logistic Pvt. Ltd (ITAT Mumbai) dated 21/10/2021

No addition under Section 68 for loan received in earlier years

Sanjay Mehta Vs ACIT (ITAT Kolkata) dated 17/09/2021

Minimum Area of one acre of land for Section 80IB (10)- HC explains

PCIT Vs Karavali Housing (Karnataka High Court) dated 04/10/2021

No section 68 addition for trade creditors settled in succeeding year through banking channels

Madhu Solanki Vs ITO (ITAT Bangalore) dated 09/08/2021

Startups (Ministry of Commerce & Industry Press Release dated 08th Dec 2021)

Posted on by Business So Simple in Business Consultancy, Entrepreneurship, MSME, Startups

To promote startups across all the State/UTs, Government of India has launched Startup India initiative in 2016. This initiative aims at building a strong ecosystem for nurturing innovation and Startups in the country. In order to meet the objectives of the initiative, Government has launched various programmes to promote Startups across the country are as below:

  1. Startup India Action Plan: An Action Plan for Startup India was unveiled on 16th January 2016. The Action Plan comprises of 19 action items spanning across areas such as “Simplification and handholding”, “Funding support and incentives” and “Industry-academia partnership and incubation”. The Action Plan laid the foundation of Government support, schemes and incentives envisaged to create a vibrant startup ecosystem in the country.
  2. Startup India: The Way Ahead: Startup India: The Way Ahead at 5 years celebration of Startup India was unveiled on 16th January 2021 which includes actionable plans for promotion of ease of doing business for startups, greater role of technology in executing various reforms, building capacities of stakeholders and enabling a digital Aatmanirbhar Bharat.
  3. Startup India Seed Fund Scheme (SISFS): Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise. The capital required at this stage often presents a make or break situation for startups with good business ideas. The Scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. Rs. 945 crore has been sanctioned under the SISFS Scheme for period of 4 years starting from 2021-22. It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.
  4. Fund of Funds for Startups (FFS) Scheme: The Government has established FFS with corpus of Rs. 10,000 crore, to meet the funding needs of startups. DPIIT is the monitoring agency and Small Industries Development Bank of India (SIDBI) is the operating agency for FFS. The total corpus of Rs. 10,000 crore is envisaged to be provided over the 14th and 15th Finance Commission cycles based on progress of the scheme and availability of funds. It has not only made capital available for startups at early stage, seed stage and growth stage but also played a catalytic role in terms of facilitating raising of domestic capital, reducing dependence on foreign capital and encouraging home grown and new venture capital funds.
  5. Ease of Procurement: To enable ease of procurement, Central Ministries/ Departments are directed to relax conditions of prior turnover and prior experience in public procurement for all Startups subject to meeting quality and technical specifications. Further, Government e-Marketplace (GeM) Startup Runway; a dedicated corner for startups to sell products & services directly to the Government.
  6. Self-Certification under Labour and Environmental laws: Startups are allowed to self-certify their compliance under 6 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporatio
  7. .Income Tax Exemption for 3 years: Startups incorporated on or after 1st April 2016 can apply for income tax exemption. The recognised startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.
  8. Exemption for the Purpose Of Clause (VII)(b) of Sub-section (2) of Section 56 of the Act: A DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act.
  9. Startup India Hub: The Government launched a Startup India Online Hub on 19th June 2017 which is one of its kind online platform for all stakeholders of the entrepreneurial ecosystem in India to discover, connect and engage with each other. The Online Hub hosts Startups, Investors, Funds, Mentors, Academic Institutions, Incubators, Accelerators, Corporates, Government Bodies and more.
  10. National Startup Awards: National Startup Awards is an initiative to recognize and reward outstanding startups and ecosystem enablers that are building innovative products or solutions and scalable enterprises, with high potential of employment generation or wealth creation, demonstrating measurable social impact.
  11. International Access to Indian Startups: One of the key objectives under the Startup India initiative is to help connect Indian startup ecosystem to global startup ecosystems through various engagement models. This has been done though international Government to Government partnerships, participation in international forums and hosting of global events. Startup India has launched bridges with over 11 countries (Brazil, Sweden, Russia, Portugal, UK, Finland, Netherlands, Singapore, Israel, Japan, South Korea) that provides a soft-landing platform for startups from the partner nations and aid in promoting cross collaboration.
  12. Support for Intellectual Property Protection: Startups are eligible for fast-tracked patent application examination and disposal. The Government launched Start-ups Intellectual Property Protection (SIPP) which facilitates the startups to file applications for patents, designs and trademarks through registered facilitators in appropriate IP offices by paying only the statutory fees. Facilitators under this Scheme are responsible for providing general advisory on diff­erent IPRs, and information on protecting and promoting IPRs in other countries. The Government bears the entire fees of the facilitators for any number of patents, trademark or designs, and startups only bear the cost of the statutory fees payable. Startups are provided with an 80% rebate in filing of patents and 50% rebate in filling of trademark vis-a-vis other companies.
  13. Faster Exit for Startups: Ministry of Corporate A­ffairs has notified Startups as ‘fast track firms’ enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies.

The Government of India as part of Startup India initiative has implemented Fund of Funds for Startups Scheme and Startup India Seed Fund Scheme to provide financial assistance through Alternative Investment Funds (AIFs) and incubators.

Fund of Funds for Startups (FFS) Scheme: A corpus of Rs. 10,000 crore has been sanctioned under the FFS Scheme, spread over 14th and 15th Finance Commission cycles. FFS Scheme does not directly provide financial assistance to startups, instead supports SEBI-registered Alternative Investment Funds (AIFs), who in turn invest money in growing Indian startups through equity and equity-linked instruments. AIFs supported under FFS are required to invest at least two times of the amount committed under FFS in startups

Startup India Seed Fund Scheme (SISFS): Rs. 945 crore has been sanctioned under the SISF Scheme for period of 4 years starting from 2021-22. 40% of total approved commitment is released as part of first installment to a selected incubator. Subsequent installments are released based on submission of proof of achievement of milestones.

Promoting women entrepreneurship has been a key national agenda for the Government. Out of the 58,000+ DPIIT recognised startups, 46% of them have at-least one-woman director. Further, under Startup India Seed Fund Scheme (SISFS), as on 06th December, 2021, 55 women-led startups have been sanctioned financial assistance.

Furthermore, under Fund of Funds for Startups (FFS) Scheme, as on 6th December, 2021, for 83 women led Startups, Rs. 1046.05 crore has been invested by the AIFs supported under the FFS Scheme.

This information was given by the Minister of State in the Ministry of Commerce and Industry, Shri SomParkash, in a written reply in the Lok Sabha today.

Single Window System (Ministry of Commerce & Industry Press Release 08th Dec 2021)

Posted on by Business So Simple in Business Consultancy, Entrepreneurship, Science & Technology, Startups

While presenting Budget 2020-21, Finance Minister announced plans to set up an Investment Clearance Cell (ICC) that will provide “end to end” facilitation and support to investors, including pre-investment advisory, provide information related to land banks and facilitate clearances at Centre and State level. The cell was proposed to operate through an online digital portal.

Subsequently, as per the mandate, DPIIT along with Invest India initiated the process of developing the portal as a National Single Window System (NSWS). Envisioned as a one-stop for taking all the regulatory approvals and services in the country, NSWS [www.nsws.gov.in] was soft-launched on 22nd September, 2021 by Commerce & Industry Minister.

This national portal integrates the existing clearance systems of various Ministries/ Departments of Government of India and State Governments without disruption to their existing IT portals.

Currently, approvals of 19 Ministries/ Departments and 10 States Single Window Systems have been on-boarded on the NSWS Portal. List of the onboarded Ministries/ Departments and States is as below:

Ministries/ Departments integrated with NSWS:

  1. M/o Corporate Affairs
  2. M/o Environment, Forest & Climate Change
  3. M/o Labour& Employment
  4. D/o Food & Public Distribution
  5. D/o Consumer Affairs
  6. M/o Health & Family Welfare (FSSAI & CDSCO)
  7. D/o Promotion of Industry and Internal Trade
  8. D/o Commerce
  9. D/o Telecommunications
  10. M/o Information & Broadcasting
  11. M/o Power
  12. M/o Railways
  13. D/o Biotechnology
  14. D/o Revenue
  15. M/o Civil Aviation
  16. M/o Agriculture & Farmers Welfare
  17. D/o Fisheries
  18. M/o Textiles
  19. M/o Petroleum and Natural Gas

States integrated with NSWS:

  1. Goa
  2. Gujarat
  3. Himachal Pradesh
  4. Odisha
  5. Uttar Pradesh
  6. Uttarakhand
  7. Punjab
  8. Karnataka
  9. Andhra Pradesh
  10. Telangana

The Know Your Approvals (KYA) Module is an information wizard which guides investors to identify an indicative list of requisite pre-operations approvals/ licenses applicable. This is facilitated by answering a series of questions which gets populated basis the information provided by the investor in the previous question. Post submission of the KYA questionnaire, the investors are able to view an indicative list of licenses pertaining to the Central/ State Governments that are applicable to them. The investors are also guided on these questions and their applicability/ purpose by an Information Toolbox. This is to enhance the ease of user experience and eliminate information asymmetry on this module.

The KYA service is live on NSWS with 544 approvals across concerned 32 Central Ministries/ Departments and 2715 approvals across 14 States. Total 3259 approvals are listed.

This information was given by the Minister of State in the Ministry of Commerce and Industry, Shri SomParkash, in a written reply in the Lok Sabha today.

Collaboration with Foreign Companies under Atmanirbhar Bharat (Ministry of Commerce & Industry Press Release dated 08th Dec 2021)

Posted on by Business So Simple in Business Consultancy, Entrepreneurship, MSME, Startups

The Government announced Atmanirbhar Bharat Abhiyan – a special economic package of Rs20  lakh crore on 12.05.2020 with the aim of making the country self-reliant and to focus on local manufacturing. It focuses on preparing the country for tough competition in global supply chains, enhance the ease of doing business, empower MSMEs, attract investments including FDI and strengthen the policies for Make in India. The package comprises of several long-term Scheme/Programmes intended to make the country self-reliant. These Schemes/Programmes are being implemented by various Ministries/Department.

Government has taken a number of effective measures to make the country self-reliant. Some the key measures are: special economic and comprehensive package of Rs. 29.87 lakh crore, 34.5 percent increase in capital expenditure in Union Budget 2021-22, and relief Package of Rs. 6.29 lakh crore in June, 2021, Production-Linked Incentive (PLI) Scheme with an outlay of Rs. 1.97 Lakh Crore for 13 key sectors, Rs. 3 Lakh Crore Emergency Working Capital Facility for Businesses, including MSMEs, Rs. 45,000 crore Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs , Rs. 1 lakh crore Agri Infrastructure Fund for farm-gate infrastructure for farmers, launch of the PM GatiShaki – a National Master Plan for multi-modal connectivity, reducing compliance burden on citizen and business to simplify, decriminalize & remove redundant laws, a liberal and transparent policy for attracting Foreign Direct Investment (FDI), launch of the National Single Window System (NSWS) as a one-stop for taking all the regulatory approvals and services in the country, building a strong eco-system for nurturing innovation and Startups in the country with the help of schemes such as Fund of Funds for Startups Scheme (FFS), and Startup India Seed Fund Scheme (SISFS) schemes, achieving integration of India Industrial National Land Bank (GIS Land Bank) in states and Make in India for world.

No Global tenders are invited for Government tenders of uptoRs. 200 crore.  Beyond Rs. 200 crore, work by various central Ministries/Departments are undertaken based on merits of the proposal submitted by companies.

This information was given by the Minister of State in the Ministry of Commerce and Industry, Shri SomParkash, in a written reply in the Lok Sabha today.

‘Make In India’ Project (Ministry of Commerce & Industry Press release dated 08 Dec 2021)

Posted on by Business So Simple in Business Consultancy, Entrepreneurship, Science & Technology, Startups

‘Make in India’ is an initiative which was launched on 25th September, 2014 to facilitate investment, foster innovation, build best in class infrastructure, and make India a hub for manufacturing, design, and innovation. It is one of the unique ‘Vocal for Local’ initiatives that promoted India’s manufacturing domain to the world. The ‘Make in India’ initiative is not a State/ district/ city / area specific initiative, rather it is being implemented all over the country.

‘Make in India’ initiative has significant achievements and presently focuses on 27 sectors under Make in India 2.0. Department for Promotion of Industry and Internal Trade (DPIIT) is coordinating action plans for 15 manufacturing sectors, while Department of Commerce is coordinating 12 service sector plans.

The Government of India is making continuous efforts under Investment Facilitation, including financial assistance to Invest India, for implementation of Make in India action plans to identify potential investors. Support is being provided to Indian Missions abroad and State Governments for organizing events, summits, road-shows and other promotional activities to attract investment in the country under the Make in India banner.

Investment Outreach activities are being carried out for enhancing International co-operation for promoting Foreign Direct Investment (FDI) and to improve Ease of Doing Business (EoDB) in the country. Steps taken to improve Ease of Doing Business include simplification and rationalization of existing processes. As a result of the measures taken to improve the country’s investment climate, India jumped to 63rd place in World Bank’s Ease of Doing Business ranking as per World Bank’s Doing Business Report (DBR) 2020 from a rank of 142 in 2014.

DPIIT, in consultation with the State Governments, has also started a comprehensive reform exercise in States and UTs in December 2014. Under Business Reforms Action Plan (BRAP), all States/UTs in the country are ranked on the basis of reforms implemented by them on designated parameters. This exercise has helped in improving business environment across States.

Measures taken by the Government on FDI Policy reforms have resulted in increased FDI inflows in the country year after year. India registered its highest ever annual FDI inflow of US$ 81.97 billion (provisional figures) in the financial year 2020-21 despite the COVID related disruptions. These trends in India’s FDI are an endorsement of its status as a preferred investment destination amongst global investors. In the last seven financial years (2014-21), India has received FDI inflow worth US$ 440.27 billion which is nearly 58 percent of the FDI reported in the last 21 years (US$ 763.83 billion).

Government has taken various other steps in addition to ongoing schemes to boost domestic and foreign investments in India. These include improving the Ease of Doing Business, Reduction in Compliance Burden, the National Infrastructure Pipeline, Reduction in Corporate Tax, Easing liquidity problems of NBFCs and Banks, Policy measures to boost domestic manufacturing through Public Procurement Orders, Phased Manufacturing Programme (PMP), Schemes for Production Linked Incentives (PLI) of various Ministries, India Industrial Land Bank, Industrial Park Rating System etc. With the announcement of PLI Schemes, significant creation of production, employment, and economic growth is expected over the next 5 years and more.

Besides the above, activities under the initiative are also undertaken through schemes/ programmes, by several Central Government Ministries/ Departments and various State Governments from time to time. The details of these measures are not centrally maintained by Department for Promotion of Industry and Internal Trade (DPIIT).

This information was given by the Minister of State in the Ministry of Commerce and Industry, Shri SomParkash, in a written reply in the Lok Sabha today.

Directors/ managers can’t be prosecuted and punished merely because the Company violated the law (SC)

Posted on by Business So Simple in Banking, Company Law, Legal awareness

Dayle De’souza Vs Government of India (Supreme Court of India) dated 29/10/2021

Facts- M/s. Writer Safeguard Pvt. Ltd. (Company) has entered into an agreement titled ‘Agreement for Servicing and Replenishment of ATM’ with M/s. NCR Corporation, the latter having earlier entered into an agreement with the SBI for maintenance and upkeep of SBI’s ATM.

A notice was issued by Labour Enforcement Officer to the appellant and one Vinod Singh, head of the company alleging non-compliance with the provisions of Minimum Wages Act, 1948 and Minimum Wages (Central) Rules, 1950 at the ATM.

Labour Enforcement Officer, on non-appearing, filed a criminal complain before the court of Chief Judicial Magistrate, under section 22A of the Act. Notably, the company is not enlisted as an accused in the complaint and has not been summoned to stand trial.

Conclusion- In absence of any specific averment, the prosecution in the present case doesn’t and cannot reply on section 22C(2) of the Act. Unless the company as a principal accused has committed the offence, the persons mentioned in sub-section (1) would not be liable and cannot be prosecuted. Section 141(1) of the Negotiable Instruments Act, extends vicarious criminal liability to the officers of a company by deeming fiction, which arises only when the offence is committed by the company itself and not otherwise.

Measures taken by Government to keep inflation under control (Press release dated 07th Dec 2021)

Posted on by Business So Simple in Financial Prudence, Public Affairs

The Government has taken various measures to keep inflation under control. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today.

Giving more details, the Minister said that some of them include the following:

  • Crude Oil/Petroleum Products: To check the petrol and diesel prices, Central Government has reduced Central Excise Duty on Petrol & Diesel by Rs. 5 and Rs. 10 respectively with effect from 04.11.2021. In response many states governments have also reduced Value Added Tax on petrol and diesel. Retail prices of petrol and diesel have sobered down across the country.
  • Essential Commodities: Price situation of major essential commodities is being monitored by the Government on a regular basis and corrective action taken from time to time.
  • Pulses: (i) A buffer stock target of 23 lakh metric tonne (LMT) has been approved for 2021-22. Stocks are subsequently utilised for cooling down prices through supply to states and disposal through Open Market sales (ii) Imposition of stock limits on some pulses under the Essential Commodities Act, 1955 in July 2021 to prevent hoarding. (iii) Changes in the import policy by keeping Tur and Urad under ‘free’ category till 31st December, 2021. (iv) Basic import duty and Agriculture Infrastructure and Development Cess on Masur have been brought down to zero and 10% respectively. (v) 5-year memorandum of understanding (MoUs) have been signed with Myanmar for annual import of 2.5 LMT of Urad and 1 LMT of Tur, and with Malawi for annual import of 0.50 LMT of Tur and MoU with Mozambique for annual import of 2 LMT Tur has been extended for another 5 years.
  • Edible Oils: To soften the prices of edible oils, the import duty on edible oils have been rationalised and stock limits imposed to avoid hoarding upto a period of March 31, 2022. National Mission on Edible Oils- Oil Palm has been approved with a financial outlay of Rs.11,040 crore to encourage domestic production and availability of oil palm.

Giving details on the various initiatives taken to safeguard the interests of the vulnerable population, both in rural and urban areas, the Minister stated that in the wake of COVlD-19 pandemic crisis in the country, the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) was started in April 2020 to provide additional free food grains to about 80 crore National Food Security Act (NFSA) beneficiaries in the country initially for a period of 3 months from April to June 2020 which was later extended for a further period of 5 months from July to November 2020.

The Minister further stated that in 2021, the PMGKAY scheme was resumed for a period of another 7 months from May to November 202l and has been further extended upto March 2022. Further, under the Atma Nirbhar Bharat Scheme (ANBS) food grains were allocated to all states/UTs for free distribution to migrants/stranded migrants and all those not having NFSA or any state PDS ration cards, for a period of 2 months of May and June 2020. Additionally, One Nation One Ration Card (ONORC) enabled ration card portability for NFSA beneficiary to lift the entitled food grains for self or on behalf of the complete household from any Fair Price Shop (FPS) in the country by using their same/existing ration card with biometric authentication on an electronic Point of Sale (ePoS) device. So far, the ONORC plan is enabled in34 States/UTs covering about 75 crore beneficiaries (94.3% NFSA population) in the country, the Minister stated.

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RM/KMNRelease Id :-1778933

Payment of GST compensation to States in times of COVID-19 pandemic (Press Release dated 07th Dec 2021)

Posted on by Business So Simple in GST

Ministry of Finance

Payment of GST compensation to States in times of COVID-19 pandemic

Posted Date:- Dec 07, 2021

As per the provisions of the GST (Compensation to States) Act, 2017, GST compensation for financial years 2017-18, 2018-19 and 2019-20 has already been paid to the States. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today.

The Minister further stated that the economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. Recently, Centre released ₹ 17,000 crore on 03.11.2021 towards GST compensation to States from the Compensation Fund. Details of GST compensation released to States/ UTs is as per details in ANNEXURE. This is in addition to GST compensation of ₹ 1,13,464 crore released to States/ UTs with legislature to partly meet the compensation payable for the period April’20 to March’21 as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement, the Minister stated.

Giving more details, the Minister stated that the issue of shortfall of cess collection into Compensation Fund and GST compensation to States/UTs due to economic impact of the pandemic has been deliberated in 41st, 42nd & 43rd GST council meetings. As per the decision of GST Council, ₹1.1 lakh crore for FY 2020-21 & ₹1.59 lakh crore for FY 2021-22 has been released to States/ UTs as back-to-back loan to meet the resource of the States/UTs due to shortfall in GST compensation. Release of this amount has been front loaded during the financial year to enable States/UTs to undertake capital expenditure. In addition, depending on the amount available in the Compensation Fund, Centre has also been releasing the regular GST compensation to States to make up for GST revenue shortfall.

The Minister stated that taking  into account, the GST compensation released from Compensation Fund as well as back-to-back loan released in FY 2020-21 and FY 2021-22, GST compensation of ₹ 37,134 crore for period April’20 to March’21 and ₹ 14,664 crore for April-September’21 is pending to States/ UTs as per provisional figures. Centre is committed to release full GST Compensation to the States/UTs as per GST (Compensation to States) Act, 2017 for the transition period by extending the levy of Compensation cess beyond 5 years to meet the GST revenue shortfall as well as servicing the loan borrowed through special window scheme, the Minister stated.

On the question of proposal to extend GST compensation beyond 2022, the Minister stated that as per Section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years from the date of implementation of GST. During transition period, the States’ revenue is protected at 14% per annum over the base year revenue of 2015-16. Central Government is committed for GST compensation to States/UTs for 5 years as per the Constitutional provision.