Centre Releases Rs 19,950 Crore As GST Compensation To States For October-November

The central government has released Rs 19,950 crore as GST compensation to states for October-November, according to an official.

The Centre has to compensate states bi-monthly for any losses they incur in the first five years of the implementation of goods and services tax, considering a 14 percent increase in the subsumed indirect taxes keeping 2015-16 as the base year.

So far, the central government has released a total of Rs 1,20,498 crore as GST compensation to the states and union territories out of Rs 78,874 crore collected as compensation cess till Jan. 31, 2020.

The central government had transferred Rs 35,298 crore to states as compensation for August-September in December after states collectively complained that delays in compensation was straining them fiscally.

For 2019-20, the amount targeted to be collected from cess in GST was revised downwards to Rs 98,327 crore from the previous estimate of Rs 1.09 lakh crore.

The Centre had transferred the excess compensation cess collected in 2017-18 and 2018-19 to the Consolidated Fund of India. This excess amount of Rs 47,271 crore was again transferred to the compensation cess fund after the monthly cess collections for the current financial year were inadequate to compensate states.

Uncertainty Ahead

In her budget speech, Finance Minister Nirmala Sitharaman had said that the central government would only transfer compensation to states that’s collected through the compensation cess. This would mean that states would no longer receive compensation considering a 14 percent growth in the taxes subsumed under GST.

One of the proposals the government is considering is to increase the compensation cess on sin goods. Even then if the compensation that states need to be given is inadequate, the levy of compensation cess would be extended for a year, and states would be paid arrears for the compensation up to 2022 on the sixth year.