Kerala finance minister K N Balagopal today urged finance minister Nirmala Sitharaman to release the pending Goods and Service Tax (GST) compensation to the states at the earliest, and also sought extension of compensation cess levy to meet the protected revenue of the states.
Responding to queries from BusinessToday.In after the meeting, Balagopal said, "The issue of pending GST compensation to the states and extension of compensation levy was discussed in the meeting."
Balagopal added that the centre owes GST compensation worth Rs 4,500 crore to the Kerala. "Out of the total pending amount, Rs 2,000 crore pertains to the previous financial year. The union finance minister has assured us that the amount will be released soon. We also demanded extension of GST compensation cess levy for another five years."
Pending GST compensation for 2020-21 have been one of the primary cause of centre-state discord in the GST Council - the apex policy making body on GST. According to data from the ministry of finance, the centre owed Rs 63,000 crore worth GST compensation to the states as of March this year.
This is despite the Rs 1,10,000 crore debt raised by the centre in FY21 to meet the compensation shortfall. Over and above the fund raised via debt, the centre has paid Rs 70,000 crore to the states for the previous financial year by March this year. With the prolonged pandemic and a dent on revenues, the centre will raise another Rs 1,58,000 crore to meet the statutory compensation to the states as per the GST laws.
The GST (Compensation to States) Act, enacted in 2017, guarantees states 14 per cent annual growth in GST revenue over base year FY16 for five years between July 2017 and June 2022. With the revenues remaining abated as an impact of Covid-19 and the economic slowdown preceding the pandemic, the states want the arrangement of GST compensation for a period of another five years from June 2022.
The centre has earlier said that a dedicated GST Council meeting to deliberate upon the issue of compensation will be held. The meeting is likely to be held after the monsoon session of the Parliament.
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