Compensation Cess Might Go Down By Rs 63,000 Crore

The government might see a shortfall of Rs 63,200 crore in GST compensation cess for the current financial year as there is a dip in the revenue collection. This calculation has been derived from the GST Council’s revenue augmentation panel. The panel has also made a prediction that shortage could probably increase to Rs 2 trillion within 2021-22.

The panel believes that apart from the restructuring of GST rate slabs, the current inverted duty structure needs to be corrected. On rationalisation of GST rates, a few of the suggestions recommended was to increase GST on precious metals from 3% to 5%, taxing the segments of health and education, and revisiting GST rates on a few items that have been brought down from the earlier 28% to 18%.

According to a presentation that was made to the GST Council, the compensation need for states is anticipated to be around Rs 1.6 lakh crore for the current fiscal, at a 5% growth rate. Nevertheless, collections of compensation cess are expected to be around Rs 96,800 crore, leading to a massive shortfall.

Also Read: Government releases Rs 35,298 crore GST compensation to states

Compensation cess collection for the financial year 2018-19 stood at Rs 95,081 crore, marginally lower than Rs 96,800 crore, which is expected during this fiscal ending March 2020.

Rs 35,298 crore was released by the centre as compensation to states for August and September months just two days before the GST Council meeting which was held on 18 December.

Nirmala Sitharaman, the Finance Minister, stated that in FY 2017-18, the total cess collection stood at Rs 62,596 crore, out of which Rs 41,146 crore was given to states. The rest of the amount, i.e., Rs 15,000 crore, was accrued in the Cess Fund. In the following year, a collection of Rs 95,081 crore was made, and Rs 69,275 crore was released to states but the cess accrued was zero.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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