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The State Will Reject Compensation Beyond June -By ASC


States are likely to push for compensation during next week’s GST Council meeting

New Delhi:

The GST Council at its meeting next week is likely to be a big problem with opposition-ruled states aggressively demanding the continuation of compensation for lost revenue, while the Center will defend such a move citing a tight revenue position.

To cover the shortfall in the GST compensation fund, the Center has borrowed and disbursed to the state Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as consecutive loans to meet part of the shortfall in cess accumulation.

In addition, the Center has also issued regular GST compensation from the fund to cover the shortfall.

“Last year, from the compensation cess collection, the Center repaid Rs 7,500 crore on interest costs for borrowing and Rs 14,000 crore will be paid this fiscal. From the next fiscal, repayment of the principal amount will begin, which will continue until March 2026,” he said. an officer.

The 47th meeting of the GST Council, chaired by the Union Finance Minister and comprising state Finance Ministers, in Chandigarh scheduled for June 28-29 is likely to see discussions turn around compensation mechanisms and Central and state revenue positions.

According to estimates, some northeastern states do not require GST compensation.

After the 45th GST Council meeting in Lucknow, Union Finance Minister Nirmala Sitharaman said the regime was compensating states for lack of revenue, as a result of imposing their taxes, such as VAT in the uniform national GST tax would end in June next year.

However, the compensation cess imposed on luxury goods and demerits, will continue to be collected until March 2026 to repay loans already made in 2020-21 and 2021-22 to compensate the states for the loss of GST revenue.

The Goods and Services Tax (GST) was introduced in the country effective July 1, 2017, and states are guaranteed compensation for the loss of any revenue arising from the implementation of GST for five years.

While state -protected revenue has grown at 14 percent compounded growth, cess collection has not increased in the same proportion. The COVID-19 pandemic further widens the gap between revenue projections and actual revenue receipts, including a reduction in cess collection.

(Except for the headline, this story has not been edited by AGRASMARTCITY staff and is published from a syndicated feed.)

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