States Seek to Extend GST Compensation to Combat COVID-19 Crisis

The states Punjab, Kerala and New Delhi are seeking the Central Government for the GST compensation for two more years after FY 2021-22. The states are rising a point that they might tide over the crunch they could face in the post-COVID-19 scenario.

GST (Compensation to States) Act, 2017 was implemented to support States for the loss of revenue resulting from GST implementation. The Central Government promised a 14% increase in tax revenue in the first five years following the introduction of GST, i.e. until FY 2021-22. The Central Government is expected to compensate for any shortfall against 14%, using the funds which are collected as GST compensation cess.

Punjab Finance Minister Manpreet Badal told that the GST compensation, which is due to the states, should be given the and GST Council could also approve to continue the GST compensation to states for a year or two after 2022 too.

He added that while this problem was to be discussed at a separate GST Council meeting, it could not be done due to the lockdown. Kerala said that it is going through a financial crisis and has been appealing for additional funding from the Centre.

Also Read: The government deliberates a six-month GST relaxation for some sectors

West Bengal asked the Center to pay its pending dues immediately. It had also written to Hon’ble Union Finance Minister Nirmala Sitharaman requesting a corporate social responsibility tag for donations made to the relief fund of the chief minister. New Delhi took up the issue of disbursing funds for the national capital to combat COVID-19.

State finance ministers also addressed issues arising from the lockdown during a video conference on 27th April 2020, including the urgent need for some sort of assistance for micro, small and medium-sized enterprises that have been most affected, in addition to aid to the services sectors.

The states should reach out to the Centre individually and will also raise the question of releasing pending GST compensation dues since December 2019. The Center recently paid Rs 34,053 in October and November pending termination of GST payments in two tranches, with the second tranche issued earlier this month.

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

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