Please extend GST compensation beyond 5 years, ask states; FM says: Report

States ask; Please extend GST compensation for more than 5 years, says FM

New Delhi:

Many states have called for an extension of the GST-based compensation mechanism beyond June 2022, Finance Minister Nirmala Sitharaman said on Monday.

Under the Goods and Services Tax (GST) Act, states guaranteed that from July 1, 2017, they would be compensated every two months for the loss of revenue for the first five years of GST implementation.

The shortfall is estimated to represent a 14 per cent annual increase in GST revenue by states in the 2015-16 core year. The 5-year term ends in June 2022.

The amount of compensation to be paid from the Compensation Fund is obtained by charging the highest tax on luxury goods, demerits and sins.

In a reply to Lok Sabha, Sitharaman said that the central government is committed to providing GST compensation to states / UTs for 5 years in accordance with the Constitution.

Asked if the government had received proposals from state governments to extend the compensation mechanism for another five years because of the difficulties caused by the pandemic, he said: “Yes, sir. Many states have asked for an extension of the compensation period.

The 2017-18, 2018-19 and 2019-20 GST compensation has already been paid to the states.

As the collection of the compensation fund falls outside the 2020-21 and 2021-22 requirements, the Center has borrowed funds of 1.10 billion and 1.59 billion euros, respectively, and transferred them to the states. loans.

It will continue to be charged until March 2026 in 2020-21 and 2021-22 to compensate states for the loss of GST revenue from the 2020-21 and 2021-22 indebtedness for luxury and demerit goods.

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