Under the GST Act, beginning July 1, 2017, states were guaranteed bi-monthly compensation for any lost revenue in the first five years of GST implementation.

The Center said Tuesday that an amount of 53,661 crore has yet to be released to the state governments to fully compensate them for their revenue shortfall for goods and services (GST) for the 2021-22 fiscal year. All contributions from previous years have been paid.

In response to a question about “why non-BJP states have higher GST fees,” Finance Minister Nirmala Sitharaman told the Rajya Sabha that the dues were settled according to a formula worked out by the GST council.

“There is no distinction made on (political) lines,” said the minister. She added that it was unfair to slander the GST council, a federal body where each state is represented by its Secretary of the Treasury.

The proceeds from the related cessions fell far short of the funds needed to compensate states for their “GST revenue shortfall” in 2020-21 and 2021-22.

Following a decision by the GST council, the center has released 1.1 lakh crore for 2020-21 and 1.59 lakh crore for 2021-22 as back-to-back loans to make up the shortfall. The center has mobilized the funds through loans under a special window from the Reserve Bank of India. So far, this fiscal, 96,576 crore has also been released to the states due to GST compensation from the designated cess fund.

Under the GST Act, states were guaranteed bi-monthly compensation for any loss of revenue in the first five years of GST implementation as of July 1, 2017. The deficit is calculated assuming a 14% annual growth in GST collections by states across the country. base year 2015-16.

Although the GST compensation mechanism expires on June 30 this year, several states have demanded that the facility be extended. However, the Center reiterated that the legal requirement was to only compensate states for GST deficiencies during the first five years after GST’s launch. It also pointed out that only for the repayment of the loan taken out to offset the states for 2020-21 and 2021-22, the cut-off dates must be in effect until the end of FY26.


This post GST: Center yet to release Rs 53,661 crore to states was original published at “https://www.financialexpress.com/economy/gst-centre-yet-to-release-rs-53661-crore-to-states/2462325/”

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