Centre releases Rs 36,400 crore GST compensation to states for three months

New Delhi: The Centre has released Rs 36,400 crore as GST compensation to the states and union territories for three months till February 2020. For the April-November 2019 period, the Centre had already released Rs 1,15,096 crore to compensate states and UTs on account of revenue loss due to implementation of the Goods and Services Tax (GST).

"Taking stock of the current situation due to COVID-19 where state governments need to undertake expenditure while their resources are adversely hit, the central government has released the GST compensation of Rs 36,400 crore to the states/UTs with legislature for the period from December 2019 to February 2020," an official statement said.

The Centre had released Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18 as compensation for GST which was rolled out on July 1, 2017. The cess collection in 2019-20, 2018-19 and 2017-18 fiscal was Rs 95,000 crore, Rs 95,081 crore and Rs 62,611 crore, respectively.

As the compensation requirement of the states was less than collection in the first two years (2017-18 and 2018-19) of GST rollout, Rs 47,271 crore GST compensation cess collected had remained unutilised in the compensation kitty.

Under the GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

There were no differences between the Centre and states with regard to compensation payment in 2017-18, 2018-19, and in the first four months (April-July) of previous current fiscal (2019-20).

However, with revenue mop-up from compensation cess falling inadequate, the Centre held back fund transfer to states for revenue shortage beginning August 2019, following which states raised the issue.