Centre releases another Rs 34,000 cr GST compensation to states, more soon

Finance Minister Nirmala Sitharaman (L) and MoS Finance Anurag Thakur during Indian Banks Association (IBA) function. PTI
The finance ministry released about Rs 34,000 crore to states again as compensation for their revenue loss in the goods and services tax (GST) regime. The fund was released in a bid to provide further relief to states amid the ongoing coronavirus outbreak, PTI reported. 

States, so far, have been paid pending dues till November and the remaining will be cleared in phases soon, PTI reported quoting sources. The finance ministry cleared about Rs 34,000 crore pending GST compensation for October and November in two tranches.

The first tranche of Rs 19,950 crore was released on February 17, while the remaining amount of Rs 14,103 crore was distributed to states and Union territories on Tuesday, sources added.

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In all, Rs 34,053 crore were released at a time when states are facing liquidity crunch due to the nationwide lockdown imposed to contain spread of coronavirus. The government has released close to Rs 1.35 lakh crore to states and union territories towards GST compensation cess. Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. 

On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss. The Centre has, so far, released about Rs 2.45 lakh crore as GST compensation to states since the implementation of GST on July 1, 2017.

GST collections in March slipped below the psychological Rs 1-lakh crore mark for the first time in four months.

Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation, which came into force from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

During July 2017-March 2018, Rs 48,785 crore was released, while between April 2018-March 2019, Rs 81,141 crore was paid to states. For April-May and June-July last year, Rs 17,789 crore and Rs 27,956 crore were released. Further, Rs 35,298 crore was paid to states as compensation for August-September and Rs 34,053 crore for October-November 2019.

GST collections in March slipped below the psychological Rs 1-lakh crore mark for the first time in four months to Rs 97,597 crore as the COVID-19 lockdown that shut most businesses compounded tax collections in an already sluggish economy.

GST mop-up in March recorded a 8.4 per cent decline over March 2019 collection of Rs 1.06 lakh crore. The collections were lower on account of dip in revenues from domestic transactions as well as imports.

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