Centre paid ₹1.65 lakh cr in GST dues to states in FY20

STATES ALSO RECEIVED ₹33,412 CR FROM THE CONSOLIDATED FUND AS GST COMPENSATION

nNEWDELHI:THE Union government released ₹1.65 lakh crore as Goods and Services Tax (GST) compensation to states in previous financial year ended March 31, 2020 even as compensation cess collection fell by over 42% that year, a finance ministry statement said on Monday.

“Central government has recently released GST compensation of ₹13,806 crore to states for March 2020. Taking this amount into account, the entire compensation up to 2019-20 has been released to the states,” it said. The cess collected in the financial year 2019-20 was ₹95,444 crore, it added. The GST regime, launched on July 1, 2017, introduces a uniform indirect tax structure across the country by merging various state and local-level levies. At the time of its introduction, the GST law assured state governments a 14% increase in their annual revenue for five years and the Centre committed to meet any shortfall in revenue through the cess levied on luxury goods and sin products such as liquor, cigarettes, among others.

The Centre has utilised the balto ance cess amount of previous fiscal years to compensate states for their revenue losses in 2019-20, besides transferring some money from the Consolidated Fund of India. “The Centre had transferred ₹33,412 crore from Consolidated Fund of India to the Compensation Fund as a part of an exercise to apportion balance of IGST (integrated GST) pertaining 2017-18.” Inter-state supply of goods or services attracts IGST. Inadequate collection of compensation cess has been a major issue. It is expected to drop even further in the current financial year due to the 68-day nationwide lockdown imposed on March 25.

After the GST Council meeting on June 12, Union finance minister Nirmala Sitharaman had said that on the request of council members, it would meet in July to discuss only “one-agenda item” that was paying compensation to states for shortfall in GST revenue. The Union finance minister is the chairperson of the apex federal body on indirect tax and finance ministers of states are its members. Normally, the council’s decisions are unanimous.

“This release will come in handy for states and reduce their borrowing especially during this time of crisis due to the pandemic. More revenue collections for the past quarter are taking place in July as the GST return filing has picked up. However, there may still be a shortfall and the Centre will have to look at its own fiscal situation in the coming months,” Archit Gupta, founder and CEO of the financial technology platform Cleartax, said.