Finance Minister Nirmala Sitharaman on Thursday during a media briefing said the coronavirus pandemic crisis left a negative impact on the goods and services (GST) collection, with the shortfall for fiscal 2020 at Rs 2.35 lakh crore. Speaking after taking part in a meeting of the decision-making body for fixing GST policies, she stated that the COVID-19 outbreak was "an act of God", which was not anticipated that has led to the GST collections getting affected. "...This year we are facing an extraordinary situation. We are facing an act of God where we may even see a contraction," she said.

Ms Sitharaman stated that more than Rs 1.65 lakh crore as GST compensation has already been released by the Centre to the States for fiscal 2020, which also includes Rs 13,806 crore for March, while cess collected for GST compensation was only Rs 95,444 crore. The GST council meeting was held today in view of severe pressure from states that have been seeking compensation for the financial deficit in the wake of the COVID-19 outbreak. 

The Centre is hard-pressed on the GST dues payment to states that have not made much revenues this year as a result of the lockdown, which was imposed nationwide in order to contain the spread of the novel coronavirus. Punjab has said that it may record a financial shortfall of around Rs 25,000 crore this year. Among the few options the GST council is considering to pay off the states include borrowing from the Reserve Bank of India (RBI). 

"Two options were placed before the states. We can facilitate through RBI. States have asked to put us both the options in a detailed form today and give them seven working days, after that they will come back. It means we can have a small meeting on GST. We will take a call. Two bi-monthly payments are delayed this year. We want only for this year. The GST Council can look into the payments again in April next year," Ms Sitharaman stressed.

Addressing the financial crisis, states being governed by the Congress and other parties have told that it falls within the Centre's regulation of paying GST dues to them. On the contrary, the government has said that it does not have any obligation as such in the event of a deficit in tax collections. Punjab Finance Minister Manpreet Singh Badal tweeted saying, "The Government of India owes us ₹ 4,400 crore for a small state like Punjab for which the total salary bill is ₹ 1,800 crore. It is getting difficult for us to run the state,".

As per the law governing GST in the country, a payment has been guaranteed to States for loss of revenue in the first five years since the GST came into force on July 1, 2017. What this implies is, an assurance for compensation in regard to any financial shortfall till 2022 has already been given to states; in case they fell below 14 percent annual growth since July 2017.