8 months of GST compensation released to states, Rs 78,704 cr pending: Finance Ministry

The Finance Ministry on Wednesday released a statement saying that the Centre has released a GST compensation of eight out of ten months of dues to the states for the fiscal ended March 2022. They further stated that Rs 78,704 crore is pending due to inadequate balance in the cess fund.

“…Rs 7.35 lakh crore has been released to States till now and, currently, only for the year 2021-22, compensation of ₹78,704 crore is pending due to inadequate balance in the fund, which is equivalent to compensation of four months,” read the statement.

In the statement, the ministry said normally, GST compensation for 10 months (April-January) of any financial year is released during that year and the compensation of February-March is released only in the next financial year.

“Normally, compensation for ten months of April-January of any financial year is released during that year and the compensation of February-March is released only in the next financial year. As explained earlier, compensation of eight out of ten months of 2021-22 has already been released to States. The pending amount will also be released as and when amount from cess accrues in the compensation fund,” it said.

At the time of introduction of GST, the Constitution amendment provided that the Centre, by law shall provide compensation to States for a period of five years for loss of revenue due to introduction of GST.

Accordingly, the GST Compensation to States Act was legislated which provides for release of compensation against 14% year-on-year growth over revenues in 2015-16 from taxes subsumed in GST. This compensation cess is credited to the compensation fund and as per the Act, all compensation is paid out of the fund. Presently, cess is levied on items like pan masala, tobacco, coal and cars.

Compensation of about Rs 49,000 crore has been released for 2017-18 from the fund, which increased to Rs 83,000 crore for 2018-19 and further to Rs1.65 lakh crore in 2019-20.