Centre releases Rs 35,398 crore as GST compensation to states

The central government on Monday released Rs 35,398 crore as GST compensation to states for revenue loss.

States haven't received compensation for loss of revenue from implementation of GST since August. Last week, Finance Minister Nirmala Sitharaman had assured that the Centre was committed to discharging its obligation and asserted that "no one should have any doubt".

The matter was likely to be discussed in the upcoming GST Council meeting on December 18. The GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet this week in the backdrop of lower-than-expected GST collection and pending compensation to many states.

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 August 2019.

Also Read: Road to simpler GST: What traders and other stakeholders want

In the first year of GST implementation in 2017-18, GST cess collection was Rs 62,596 crore, out of which Rs 41,146 crore was paid to states. The remaining Rs 15,000 crore was accumulated. In the subsequent year, GST collection was Rs 95,081 crore and Rs 69,275 crore was released to states.

In the current fiscal, the government has already collected cess of Rs 55,467 crore till October 31, 2019, just 1.5 per cent more than what was collected last year during the same period.

Also Read: Compensation cess: 7 states to move SC if Centre doesn't pay up Rs 30,000 crore GST dues

As per GST law, a cess is levied on top of 28 per cent tax on luxury cars, demerit and sin goods like aerated drink and tobacco to collect revenue to compensate states for any revenue loss on account of GST implementation. The deficit is calculated assuming that states' GST revenues grow at 14 per cent every year beginning 2015-16. The compensation cess was planned to be levied for the first five years of the GST. However, many states have already started demanding an extension beyond 2022.

Edited by Chitrajan Kumar