India's top finance officials will at a meeting on Friday discuss compensation for states that are already battling lower tax revenues while also gearing up for more expenses linked to COVID-19 vaccinations, government and industry officials said.
A review of taxes on medical equipment and supplies is also likely to be on the agenda as India battles a devastating second wave of COVID-19 infections, they added.Centre and state governments are staring at an estimated drop in tax revenues of about 2 trillion rupees in the year to March 2022, three government officials said, while the centre's directive for states to fund vaccinations for adults below 45 years will further add to states' woes.
"The central government should definitely compensate," T.S. Singh Deo, finance minister of the central Indian state of Chhattisgarh told Reuters ahead of the Goods and Services Tax Council meeting this week. While the federal government may not be in a position to provide immediate cash relief, it may look at ways to extend a surcharge on GST rates beyond 2022 and offer soft loans to states that need immediate funding, analysts said.