THE GST COMPENSATION CONUNDRUM

States have not got any compensation for the goods and services tax (GST) shortfall so far this fiscal year. Maharashtra leads in compensation dues requirement up to July, followed by Karnataka, Uttar Pradesh, Gujarat, and Tamil Nadu. In fact, the compensation requirement in the four months up to July for Maharashtra, UP, Telangana, Andhra Pradesh, Jharkhand, Assam, and Meghalaya has exceeded that for the entire FY20. The compensation cess collection is 26.4 per cent lower in the Aprilaugust period this year on a year-on-year basis. While 12 states have chosen option 1 as their preference, under which ~97,000 crore will be borrowed under a special window of the Reserve Bank of India, Manipur has picked the option 2, where the full shortfall of ~2.35 trillion, including that arising out of Covid-19, will need to be borrowed.