What is the government plan on compensating states on the GST front?

Nirmala Sitharaman has given an indication to the states that the government would be open to discuss more options to compensate the various states on account of shortfall in the GST compensation cess. Government had earlier asked states to borrow.

The finance minister has already ruled out the possibility of compensating states from the Consolidated Fund of India. She underlined that this was purely due to revenue shortfall and the centre was not reneging on any of its commitments.

Finance minister has already sought Parliament approval for additional spending of Rs.235,000 crore in FY21 to meet the mounting costs of the Coronavirus pandemic and to handle the lag effect. Nearly one-fourth of this amount will be met by cost savings.

The FM also underlined that the centre had already transferred 107% of gross tax revenues to the states while it was meeting its own costs through borrowings. The revenues went for a toss after the Indian economy contracted by -23.9% in the Jun-20 quarter.