‘States to soon get another Rs 35,000 cr as GST compensation’

Under the GST law, states are guaranteed compensation for revenue loss for 5 years if their revenue does not increase 14 per cent on the base year of 2015-16. There were no differences between the Centre and states with regard to compensation payment in 2017-18, 2018-19, and in the first four months of the current fiscal.

However, with revenue mop-up from compensation cess falling inadequate, the Centre held back fund transfer to states for revenue shortage beginning August. Following this, states raised the issue with the Centre and in December 2019, Rs 35,298 crore was released as compensation for August-September. “We will soon transfer another Rs 35,000 crore from the consolidated fund of India (CFI) to compensation cess fund in 2 instalments. The first tranche will be compensation for Oct-Nov,” an official said.

The excess collection from compensation cess in 2017-18 and 2018-19 was deposited in the CFI earlier and this will now be transferred back to the compensation fund, the official added. Finance Minister Nirmala Sitharaman in her Budget speech said it is decided to transfer to the GST Compensation Fund balances in two instalments.

The Centre has so far released about Rs 2.11 lakh crore as GST compensation to states since the GST implementation.