GST compensation: Centre yet to clear ₹3,298.53 crore

With the govt. missing the revenue target, the amount, if released, will provide big relief

The Goods and Services Tax (GST) compensation is expected to provide big relief to the State government as it is likely to miss the revenue targets this financial year.

While the protected revenue (up to November 2020) was ₹17,807.90 crore, the collections stood at ₹11,245.15 crore, leaving a gap of ₹6,562.75 crore.

As per the GST law, the Centre compensates the States to ensure that their revenue is protected at the level of 14% of the base year tax collection in 2015-16.

That is, if the revenue is less than 14% of the base year, the State will be be entitled to receive the GST compensation.

So, the gap in the protected revenue has to be paid by the Union government, sources say.

The Central government has cleared ₹1,360.47 crore towards GST compensation, besides extending ₹1,936.53 crore as loan to the State government.

The loan has been provided under the borrowing scheme announced by the Centre to bridge the gap in view of the fall in the GST collections due to the COVID-19 pandemic.

“The loan will be repaid by the Centre in 2022. There will not be any burden on the State government,” says a senior official on condition of anonymity.

The total revenue collection from 2017-18 (July 2017 to March 2018) to 2020-21 (up to November-2020) stood at ₹65,468.49 crore. The protected revenue during the period was ₹75,315.56 crore. The shortfall during the period was ₹10,242.72 crore. The total compensation received since July 2017 was ₹5,007.66 crore.

Thus, the Centre has to clear ₹3,298.53 crore towards GST compensation, the official says.

Andhra Pradesh had received a compensation of ₹280 crore during the first year of the launch of GST. The State’s monthly average income was fixed at ₹1,120.80 crore in 2015-16. It did not claim GST compensation in the subsequent years as the GST collections surpassed the protected revenue.

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