The Central Government has released Rs 13,806 crore to states and Union Territories (UT’s) for March 2020 as compensation for their losses due to the Goods and Services Tax (GST). With this, the total compensation released for the financial year 2019-20 will be Rs 1.65 lakh crore, against a cess collection of Rs 95,444 crore.
Under the GST law, states were guaranteed for payment for any revenue loss in the first five years of GST implementation. The shortfall is calculated assuming that states or UT’s revenues will grow at a 14% rate annually taking FY 2015-16 as the base year.
The Centre has released Rs 1.51 lakh crore for April 2019 – February 2020. The payment for March was delayed due to inadequate collections from the compensation cess. The following are the top five states in receipt of GST compensation as per the data released by the Finance Ministry.
|S No||Name of State or Union Territory||Amount (in Crore) (Rs)|
However, as per the tweet made by the Finance Ministry, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim have not received any amount as GST compensation. So, we can understand that these states or UT’s indirect tax revenues have grown for at least 14% Y-o-Y after the implementation of GST.
During June 2020, the Centre had released Rs 36,400 crore as GST compensation to the states and UT’s for three months from December 2019 to February 2020. For April 2019 to November 2019 period, the Centre has already released a Rs 1.15 lakh crore to the states.
The Centre had released Rs 41,146 crore in FY 2017-18 and Rs 69,275 crore in FY 2018-19 as GST compensation. The cess collections in FY 2017-18, FY 2018-19 and FY 2019-20 was Rs 62,611 crore, Rs 95,081 crore and Rs 95,444 crore respectively.
There was a gap of around Rs 70,000 crores between the GST compensation collections and requirement. Earlier the speculations came out that the government might go to market borrowings for payment of GST compensation to states. But, the Centre has utilised the first two year’s surplus GST compensation collections of Rs 47,256 crore along with unallocated IGST collections of Rs 33,412 cr for compensating states.
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DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.