Centre clears entire GST compensation; TS gets Rs. 296 cr, AP Rs. 3,199 cr

Hyderabad: The Central government released the entire GST compensation payable to states up to 31 May 2022 amounting to Rs. 86,912 crores. Andhra Pradesh received Rs. 3,199 crores while Telangana got Rs. 296 crores.

The finance ministry said this decision was taken to assist the states in managing their resources and ensuring that their programmes are carried out successfully during the financial year. This decision has been taken despite the fact that only about Rs. 25,000 crores are available in the GST Compensation Fund. The balance is being released by the Centre from its own resources pending collection of cess.

Goods and Services Tax (GST) was introduced in the country with effect from 1 July 2017 and states were assured compensation for any loss of revenue arising on account of the implementation of GST as per the provisions of the GST (Compensation to States) Act 2017 for a period of five years. For providing compensation to states, cess is levied on certain goods and the amount of cess collected is credited to the compensation fund. Compensation to states is being paid out of this fund with effect from1 July 2017.

Bi-monthly GST compensation to states for the period 2017-18 and 2018-19 was released on time out of the compensation fund. As the states' protected revenue has been growing at 14% compounded growth whereas the cess collection did not increase in the same proportion, COVID-19 further increased the gap between protected revenue and the actual revenue receipt, including a reduction in cess collection.

In order to meet the resource gap of the states due to short release of compensation, the Centre borrowed and released Rs. 1.1 lakh crores in 2020-21 and Rs. 1.59 lakh crores in 2021-22 as back-to-back loans to meet a part of the shortfall in cess collection. In addition, the Centre has also been releasing regular GST compensation from the fund to meet the shortfall.