The Finance Ministry notified the Parliament on Monday that the remaining Goods and Services Tax (GST) Compensation dues to States now totals Rs. 35,266 crores.
On Monday, the Finance Ministry informed the Parliament that the outstanding GST Compensation owed to states has now amounted to Rs. 35,266 crores. These dues would be paid for from GST Compensation Cess collections, whose levy has been prolonged till March 2026. The Goods and Services Tax cess is paid on intra-state and inter-state supply of goods or services to compensate states for revenue loss caused by the implementation of the GST in India.
The states were assured a considerable amount of revenue in order to switch to the GST regime latest by June 2022. But with the sunset of this compensation regime from this month, several states are now likely to face revenue stress. As per National Institute of Public Finance and Policy (NIPFP), Punjab, Goa and Chhattisgarh are to suffer the most revenue loss with the end of the five- year compensation plan.
According to preliminary data for the month of June, Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh, Delhi, and Gujarat had the highest outstanding tax compensation dues. These six States have compensation arrears of Rs. 17,668 crores, amounting to almost half of the total compensation owed to all States.
Pankaj Chaudhary talks about the compensation dues in the Parliament
Mr. Pankaj Chaudhary, Minister of State for Finance stated “Entire GST compensation dues of States and UTs has been cleared by Central Government for period up to May 31, 2022, by releasing ₹86,912 crores. This decision has been taken despite the fact that only about ₹25,000 crore was available in the GST Compensation Fund…Now, the GST compensation for month of June 2022 [is] pending to all States/UTs.” while responding to a question asked during the Lok Sabha session.
He mentioned that several states have requested the Union Government for an extension on the GST compensation period beyond June 2022. The Lok Sabha minister clarified the members’ queries by explaining that the tax compensation received by the states does not form a large part of their revenue. He also stated that the Centre has no plans to consider a change in the sharing formula for GST revenues in the near future.
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