Centre clears entire GST compensation due till date to states
New Delhi: The Government of India on Tuesday said it has released the entire amount of GST compensation payable to states up to 31st May, 2022 by releasing an amount of Rs.86,912 crores.
This decision was taken to assist the states in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year, read a government statement.
This decision has been taken despite the fact that only about Rs.25,000 crore is available in the GST Compensation Fund, read the statement further.
The balance is being released by the Centre from its own resources pending collection of Cess.
Goods and Services Tax was introduced in the country w.e.f. 1st July, 2017 and States were assured for compensation for loss of any revenue arising on account of implementation of GST as per the provisions of the GST (Compensation to States) Act, 2017 for a period of five years.
✅ Centre clears entire GST Compensation of the amount ₹86,912 crore due to States till 31st May, 2022
— Ministry of Finance (@FinMinIndia) May 31, 2022
✅ The amount will assist States in managing their resources and ensuring that their programmes, especially the Expenditure on capital, are carried out successfully pic.twitter.com/1H9KZX4TfC
For providing compensation to States, Cess is being levied on certain goods and the amount of Cess collected is being credited to Compensation Fund. Compensation to States is being paid out of the Compensation Fund w.e.f. 1st July, 2017.
Bi-monthly GST compensation to States for the period 2017-18, 2018-19 was released on time out of the Compensation Fund.
As the States’ protected revenue has been growing at 14% compounded growth whereas the Cess collection did not increase in the same proportion, COVID-19 further increased the gap between protected revenue and the actual revenue receipt including reduction in cess collection.
In order to meet the resource gap of the States due to short release of compensation, Centre has borrowed and released Rs.1.1 lakh crore in 2020-21 and Rs.1.59 lakh crore in 2021-22 as back-to-back loan to meet a part of the shortfall in cess collection.
All the states have agreed to the above decision.
In addition, Centre said it has also been releasing regular GST compensation from the Fund to meet the shortfall.
What will Chief Ministers of opposition ruled states like Maharashtra and West Bengal now complaint about? https://t.co/sptzgZyXdb
— Amit Malviya (@amitmalviya) May 31, 2022
"With the concerted efforts by Centre and States, gross monthly GST collection including Cess has been showing a remarkable progress," read the statement.
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