GST Compensation To States Likely To See Shortfall Of Rs 63,000 Crore In 2019-20

The Goods and Services Tax (GST) Council was informed on Wednesday that the central government might have a compensation cess shortage of Rs 63,200 crore in the ongoing financial year. The calculation by the Council’s revenue augmentation panel also says this shortage could increase rapidly to Rs 2 trillion by 2021-22.

The delay in the release of compensation to states has already become a bone of contention between Centre and states.

As per a presentation made to the GST Council, the compensation requirement for states is expected to be nearly Rs 1.6 lakh crore for the ongoing fiscal year, at a growth rate of 5%. However, compensation cess collections are expected to be about Rs 96,800 crore, leading to a huge shortfall.

The required collections have more than doubled over the previous fiscal from Rs 69,275 crore, while actual collections have remained almost flat due to economic slowdown.

Compensation cess collection for FY 2018-19 was Rs 95,081 crore, marginally lower than Rs 96,800 crore which is expected this fiscal ending March 2020.

The centre had released Rs 35,298 crore as compensation to states for August and September period just two days ahead of the GST Council meeting on December 18. The payment was released after some states including Kerala, West Bengal threatened to approach the Supreme Court over the delay.

Rating agency Investment Information and Credit Rating Agency (ICRA) has estimated a shortfall of Rs 2.2 lakh crore for all states.

Finance minister Nirmala Sitharaman had stated in Rajya Sabha that in 2017-18, the total cess collected was Rs 62,596 crore, of which Rs 41,146 crore was released to states. The rest Rs 15,000 crore was collected in the Cess Fund.

In the next year, Rs 95,081 crore was collected and Rs 69,275 crore released to states but “cess accumulated was zero,” she had said.

After dropping to a 19-month low in September at Rs 91,916 crore, GST collection recovered to Rs 1.03 lakh crore in November, recording a 6 per cent year-on-year growth on the back of festive demand. Despite that, the collection is lower than the rate required to meet the steep target for FY20.

Also Read: Centre Releases Over Rs 35,000 Crores To States, Union Territories As Pending GST Compensation