Finance Ministry Says GST Compensation to States Pending For Dec-March FY20

Finance Minister Nirmala Sitharaman on Sunday said GST compensation is due to all the states for the four-month period of December-March.

"We are periodically talking about it. GST dues are very clearly explained in the GST Council. It is not for selective states... All states' GST dues which we recognise for December, January, February, March have not been paid," Sitharaman told reporters here.

Under GST law, states are guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

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 (April-July) of the previous fiscal (2019-20).

However, with revenue mop-up from compensation cess falling, the Centre held back fund transfer to states 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, while Rs 34,053 crore was released in two instalments in February and April as compensation for October-November.

The Centre has, so far, released over Rs 2.45 lakh crore as GST compensation to states since the implementation of the new indirect tax regime on July 1, 2017.

During July 2017-March 2018, Rs 48,785 crore was released, while between April 2018-March 2019, Rs 81,141 crore was paid to states.

For April-May and June-July last year, Rs 17,789 crore and Rs 27,956 crore were released. Further, Rs 35,298 crore was paid to states as compensation for August-September and Rs 34,053 crore for October-November 2019.