Covid-19 impact: States likely to get IGST dues worth Rs 24,000 crore

Topics IGST | Coronavirus | GST

Punjab Finance Minister Manpreet Singh Badal says Punjab has flagged in September last year that the Centre wrongly credited ~1.76 trillion in the Consolidated Fund of India
In what may come as a breather for states struggling with the revenue shortfall amid the Covid-19 pandemic, the Centre will disburse Rs 24,000 crore of unsettled integrated goods and services tax (IGST) dues from 2017-18.


This decision was taken by the group of ministers (GoM) led by Bihar Deputy Chief Minister Sushil Kumar Modi, at a meeting on Thursday.


The proposal will be presented to the GST Council for approval at the meeting on Monday, expected to be a stormy one over the issue of compensation.


“Punjab had flagged in September last year that the Centre wrongly credited Rs 1.76 trillion in the Consolidated Fund of India. We are very glad with the decision taken by the GoM today. While I won’t call it a fraud, it was a violation of the Constitution,” Punjab Finance Minister Manpreet Singh Badal told Business Standard.


The issue dates back to the year GST was introduced, when the unsettled am­ount of Rs 1.76 trillion left in IGST was transferred to the Consolidated Fund of India by the Centre, instead of distributing it to the states as an ad hoc settlement.


Therefore, states only got 42 per cent of that as devolution according to the 14th Finance Commission formula, instead of 50 per cent share. Besides, states have raised the issue that they are also entitled to 42 per cent of the Centre’s share in the kitty, taking the total unsettled dues to over Rs 55,000 crore.


While the Centre in June released Rs 36,400 crore worth of IGST dues in lieu of compensation for December, January and February, more remained to be given to them. Generally, compensation is paid from the cess, but collection has fallen due to the economic slowdown.


Of that, while Rs 36,400 crore was paid in lieu of compensation money earlier this month to states, Rs 20,000 crore of dues still remain unsettled.


The Comptroller and Auditor General (CAG) had pointed out in its report that the procedure for devolution of IGST from the Consolidated Fund of India was against the provisions of Constitution.


IGST is levied on inter-state movement of goods and imports. There should ideally be ‘nil' balance in the IGST pool, since the amount should be used for payment of CGST and SGST. As some businesses are ineligible to claim the benefits of input-tax credit (ITC), the IGST account always has some un-utilised amount.


The Constitution was amended in August 2018 to allow for distribution of any balance IGST equally between Centre and states in a 50:50 ratio.

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