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Covid an ‘act of God’, can result in a contraction of the economy: Nirmala Sitharaman

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NEW DELHI: Finance Minister Nirmala Sitharaman said Thursday that the economy is facing an extraordinary ‘act of God’ in the form of the coronavirus pandemic that may result in a contraction in India’s growth for the current fiscal .
“This year we are facing an extraordinary situation … we are facing an act of God that could even result in a contraction of the economy, to what percentage am I not getting into that,” Sitharaman said while addressing the media afterwards of the 41st GST Council Meeting.
It also revealed that the pandemic has severely affected GST’s revenues, which have expanded to Rs 2.35 lakh crore this year from a deficit of Rs 70,000 crore last year.
As calculated by the Center, the compensation requirement by states in the current tax would be Rs 3 lakh crore, of which Rs 65,000 crore is expected to be covered by the rate imposed under the GST regime. Therefore, the total deficit is estimated at Rs 2.35 lakh crore. Of this, Rs 97,000 crore is due to the GST deficit, while the rest is due to the impact of Covid-19 on the economy.
Citing a legal opinion of the Attorney General, he ruled out that the Center made up the deficit in its coffers or borrowed against its balance sheet.
The minister also said that no proposal was made to increase taxes to make up for the aggravated deficit due to Covid. States can make up the deficit through a loan through a special window, and the loan can be repaid after five years from the collection of the GST tax.
When the GST was implemented in 2017, the Center had promised to compensate states for any loss of revenue over five years from a group created by imposing a tax above the GST on luxury goods and sin. However, this tax reserve generated a surplus in the first two years, but witnessed a deficit in fiscal 2020, as well as the current one.

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