GST Compensation Cess to Continue Beyond 2024
Over 81,000 crore INR is due as GST compensation for the states in the fiscal year 2021. The Parliament was informed this Monday that over 55,000 crore INR is outstanding for April-May 2021. A compensation of Rs. 91,000 crore has been granted to all the states and UTs. This information was shared by the Minister of State Finance, Pankaj Chaudhary in a written response to the Lok Sabha.
The minister added that the economic impact of the pandemic has led to higher compensation requirements owing to lower GST collection, as well as a lower collection of GST compensation cess.
According to the GST (compensation to states) Act, 2017, the compensation cess was introduced to relieve the states of the loss of revenues. Under this act, the states were to be compensated twice a month for any loss of revenue in the first five years of the GST implementation.
However, in the current economic situation post-pandemic, the GST compensation cess is speculated to extend for two more years. That is, it may stretch beyond 2024.
After the 43rd GST Council meeting, the Union Finance Minister Nirmala Sitharaman shed some light on the matter. She said that the government would stick to the same formula for GST compensation cess as last year in this fiscal year. She said that the centre will borrow Rs. 1.59 lakh crore to offer as compensation to the states.
Recently, the Minister of State Finance shared details on GST compensation yet to be disbursed to the states:
- Rs. 81,179 crores to be released to 27 states and UTs for FY2021
- Rs. 55,345 is outstanding for 26 states and UTS for the first two months of this fiscal year
The major states yet to receive the amount in FY21 are Maharashtra, Karnataka, UP, Gujarat, Tamil Nadu, Delhi, West Bengal and Punjab.
The compensations for the financial years 2017-18, 2018-19 and 2019-20 have already been paid to the states. As per the deliberations in the 43rd GST council meeting, the centre has decided to borrow Rs. 1.59 lakh crore to offer as GST compensation to the states and the UTs in FY21. So far, Rs. 75,000 crore has been released to the states and union territories on 15th July 2021.
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