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Govt to soon release another Rs 35,000 crore GST compensation to states

Finance Minister Nirmala Sitharaman in her Budget speech said the government has decided to transfer to the GST Compensation Fund balances in two instalments

twitter-logoBusinessToday.In | February 9, 2020 | Updated 15:10 IST
Govt to soon release another Rs 35,000 crore GST compensation to states
Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of GST implementation

The central government will soon release another Rs 35,000 crore pending Goods and Services Tax (GST) compensation to states for revenue loss.

"We will soon transfer another Rs 35,000 crore from the consolidated fund of India (CFI) to compensation cess fund in 2 instalments. The first tranche will be compensation for October-November," an official told news agency PTI.

Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of GST implementation, which came into force from July 1, 2017. This monthly compensation was to be paid within two months but states haven't received any such amount since September 2019. Compensation cess is levied for making up for any shortfall in states revenue due to implementation of GST. The short-fall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Finance Minister Nirmala Sitharaman in her Budget speech said the government has decided to transfer to the GST Compensation Fund balances in two instalments.

According to credit rating agency ICRA, there could be a shortfall of around Rs 15,000-25,000 crore in GST Compensation Fund to states in FY20. The states' requirement of GST compensation for the October 2019-January 2020 period was pegged at Rs 60,000-70,000 crore. In the current fiscal, the Centre has already released Rs 1 lakh crore worth compensation for the February-September 2019 period.

In December 2019, the Centre had released Rs 35,298 crore to states to compensate for the revenue loss on account of GST rollout.

Last week, Union Minister Anurag Thakur said in Lok Sabha that the GST Compensation had been released till September, 2019 and the next bi-monthly GST Compensation was due for October-November, 2019. A total of Rs 2,10,969.49 crore has been released as GST compensation to states so far including UTs of Delhi and Puducherry after implementation of GST, the minister said.

Period for which compensation has been released: July, 2017 March 2018 - Rs 48,785.35 crore; April 2018 March 2019 - Rs 81,141.14 crore; April-May 2019 - Rs 17,789 crore; June-July 2019 - Rs 27,956 crore; August-September 2019 - Rs 35,298 crore.

By Chitranjan Kumar with PTI inputs

Also Read: GST compensation to states to see shortfall of Rs 15,000-25,000 crore in FY20: ICRA

Also Read: GST compensation gap to states could be a whopping Rs 63,200 crore

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