Centre clears entire GST compensation dues upto May 31 to states

New Delhi: The Centre on Tuesday said it has released Rs 86,912 crore to states on account of GST compensation clearing the entire dues upto May 31, 2022.
The Finance Ministry in a statement said that the decision was taken to assist the states in managing their resources and ensuring that their programs especially the expenditure on capital is carried out successfully during the financial year.
“This decision has been taken despite the fact that only about Rs 25,000 crore is available in the GST Compensation Fund. The balance is being released by the Centre from its own resources pending collection of Cess,” the statement said.
Goods and Services Tax (GST) was introduced in the country on July 1, 2017 and states were assured of compensation for loss of any revenue arising on account of implementation of GST as per the provisions of the GST (Compensation to States) Act, 2017 for a period of five years.
For providing compensation to states, Cess is being levied on certain goods and the amount of Cess collected is being credited to Compensation Fund.
Compensation to states is being paid out of the Compensation Fund with effect from 1st July, 2017.
Bi-monthly GST compensation to states for the period 2017-18, 2018-19 was released on time out of the Compensation Fund. As the states’ protected revenue has been growing at 14% compounded growth whereas the Cess collection did not increase in the same proportion, COVID-19 further increased the gap between protected revenue and the actual revenue receipt including reduction in cess collection.
“In order to meet the resource gap of the states due to short release of compensation, Centre has borrowed and released Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loan to meet a part of the shortfall in cess collection,” Finance Ministry said. (UNI)