States request GST benefits extension beyond 5 yrs: FM
NEW DELHI: Many states have requested an extension of the compensation mechanism under the goods and services tax (GST) regime beyond June 2022, Union finance minister Nirmala Sitharaman said on Monday.
Under the GST law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of GST implementation from July 1, 2017. The shortfall is calculated assuming a 14% annual growth in GST collection by states over the base year of 2015-16. The fiveyear period ends in June 2022.
The compensation amount to be paid from the compensation fund is arrived at by levying cess on top of the highest tax slab on luxury, demerit, and sin goods.
The central government is committed to giving GST compensation to states and Union territories for five years in line with constitutional provisions, Sitharaman said in a written reply in the Lok Sabha. The minstates. ister said the government has received proposals from state governments requesting extension of compensation mechanism for another five years in view of difficulties caused by the pandemic. “Many states have requested for extension of the compensation period during the deliberations in GST Council and in letters addressed to the central government,” she said.
GST compensation for financial years 2017-18, 2018-19, and 2019-20 has already been paid to As collections in the compensation fund are falling short of requirement, for 2020-21 and 2021-22, the Centre has borrowed ₹1.10 lakh crore and ₹1.59 lakh crore, respectively and passed it on to states as back-toback loans.
The compensation cess, levied on luxury and demerit goods, will continue to be collected till March 2026 to repay the borrowings done in 2020-21 and 2021-22 to compensate states for GST revenue loss.