Tag: GST compensation

Centre releases GST compensation of Rs 17000 crore to states, UTs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Centre on Friday said it has released Rs 17,000 crore to the states and union territories towards the balance GST compensation for the period April to June 2022.

The total amount of compensation released to the states/UTs so far, including the aforesaid amount, during the year 2022-23 is Rs 1,15,662 crore, the Finance Ministry said in a statement on November 25.

This is despite the fact that total cess collection till October 2022 is only Rs 72,147 crore and the balance of Rs 43,515 crore is being released by the Centre from its own resources, the statement said.

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“With this, the Centre has released, in advance, the entire amount of cess estimated to be collected this year till March-end available for payment of compensation to states,” the statement said.

The decision was taken to assist the states in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year, the MoF added.

In May this year, the Centre released Rs 86,912 crore as provisional GST compensation to states for the period February-May 2022 despite the fact that there was only about Rs 25,000 crore in the GST Compensation Fund, by arranging for around Rs 62,000 crore from its own resources.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

GST council seems to be losing unanimity, says TS Singh Deo

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The GST council meeting has ended with no decision on extending the compensation window to states. BJP-ruled states joined others in demanding an extension to protect state revenues. The five-year compensation window expires tomorrow.

However, the states said it is a question of recovering from the pandemic, while some said states must also stand on their own and how long can the Centre prop them up.

Speaking to CNBC-TV18, TS Singh Deo, Member of GST Council, said, “A few states said that we should all learn to stand on our feet — how sad that is. Those who are better off and those who are less in doubt — those who have better revenues, just because they are consuming states and not producing states (are not worried). Are we trying to say that we will not take into consideration the views of the losses being suffered by the manufacturing and producing states just because there have a larger population?”

He added, “The GST Council seems to be losing its unanimity. How can any state function unless it is guaranteed a reasonable growing revenue source? How is that state going to meet up its demands for capital expenditure for social sector investment, for a provision of jobs, etc? How is any state government going to do that? You said learn to stand on your own feet when you take away our revenue, which we were getting as mining states; as states with the heavy industries. You’ve taken our share and now you are saying learn to stand on your feet.”

Read Here: GST Council defers state compensation decision till next meeting in August

MS Mani, Partner at Deloitte India said, “If all the discussions on compensation cess do seem to be happening between the Centre and states the way it is supposed to, it would be good to get some industry stakeholders also some industry bodies because eventually, the cess is being collected from a clutch of businesses, largely automobile and several others.”

The council has deferred the proposal to levy 28 percent tax on casinos and online gaming. A panel of ministers was given 15 more days to iron out issues over the valuation mechanism.

Bipin Sapra, Tax Partner at EY India, said, “My view was that somehow the online gaming industry hasn’t even got its voice out there. In the current scenario, it pays 18 percent on the gross gaming revenue, which is basically the rake fee. Online gaming is a really growing industry. The moment you make it to 28 percent on the gross value, the growth, which we are going to see is going to go away. So I think this reconsideration is a welcome step.”

GST Council has also decided to remove the tax exemption on milk products, food grains, some vegetables. Also, it has hiked tax rates on LED lights, solar water heaters, some leather goods and textile works.

Prashanth Agarwal, Partner at PwC India, said, “Textile was deferred actually speaking last time. So, this time around they have again gone ahead and done the necessary change in the rate. So, hopefully most of these will only result in ensuring that the working capital issues the industry faces as far as the blocking of the credit and the refunds are concerned, they are taken care of. But of course, for each goods, it has to be looked at separately.”

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GST Council defers state compensation decision till next meeting in August

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Goods and Services Tax (GST) Council’s two-day meeting has ended in Chandigarh with no decision on extending the compensation window to the states. The next GST Council meeting will be held in August.

The Opposition as well as some BJP-ruled states have been demanding an extension of the 5-year compensation window that expires on June 30.

Union Finance Minister Nirmala Sitharaman said: “A few states before lunch today said that they would like the compensation to continue for some time. Even as a few other states said, yes, it is a question of coming out of the pandemic but yet we need to have states also stand on their own. How long can this go on and so on. They were broadly statements being to the sense of compensation can be continued, if not for five years, at least for a few years. So, they were that kind of input on the compensation cess.”

The Opposition-ruled states have also cited a recent Supreme Court ruling indicating decisions made by the Council are not binding and states need not stick to them. The ruling by the SC has been seen by some as states having powers to determine taxation.

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BJP ruled states join Opposition in demanding GST compensation period extension as July 1 deadline approaches

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On the second day of the GST Council meeting in Chandigarh, various states, including BJP-ruled ones, have sought an extension in the compensation period deadline which as of now is on July 1.

States like Uttarakhand and Pudduchery, both ruled by Bhartiya Janta Party, have said that they will appeal to Finance Minister Nirmala Sitharaman for relief as their budgets are severely getting hurt.

Speaking on the sidelines of the meeting, Premchand Aggarwal, Finance Minister, Uttarakhand, told the media, “We will demand centre to help us fight current revenue loss. We are facing a loss of Rs 5,000 crore per year and it is for the centre to decide on compensation. Our demand is to either extend the compensation or help us with these funds in any other way or financial support.”

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Jagdish Devda, the finance minister of Madhya Pradesh also said that his state is looking at alternative revenue generation avenues. The Puducherry FM also echoed a similar demand.

The Opposition-ruled states have been asking for an extension of five years. The states have also cited a recent Supreme Court ruling that decisions made by the Council are not binding and states need not stick to them. The ruling by the court has been seen by some as states having powers to determine taxation.

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Chhattisgarh Finance Minister TS Singh Deo said the present formula for equally splitting revenues from the GST between the Centre and states should be changed, with a larger share of 70-80 percent being given to states.

Kerala Finance Minister KN Balagopal said the GST compensation mechanism for states should be extended to make good the revenue loss.

In order to meet the resource gap of the states due to the short release of compensation, the Centre borrowed Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 as back-to-back loans to meet a part of the shortfall in cess collection.

As per data on revenue growth collated for the Council meeting, only five out of 31 states/UTs, Arunachal Pradesh, Manipur, Mizoram, Nagaland, and Sikkim, registered a revenue growth higher than the protected revenue rate for states under the GST in 2021-22.

Puducherry, Punjab, Uttarakhand, and Himachal Pradesh have recorded the highest revenue gap between the protected revenue and post-settlement gross state GST revenue in 2021-22.

As per a Reserve Bank study, the weighted average tax rate under the GST has declined from 14.4 per cent at the time of its launch to 11.6 per cent in September 2019. In the letter to Sitharaman, Deo said Chhattisgarh had suffered a revenue loss of Rs 4,127 crore in the last fiscal, Rs 3,620 crore in 2020-21, Rs 3,176 crore in 2019-20 and Rs 2,786 crore in 2018-19.

(With PTI inputs)

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Few states may need to be given GST compensation after June

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Overall goods and services tax (GST) revenues are growing at a strong clip but the uneven growth registered by a few states probably indicates all is not well.

The government’s October-December GST data shows states such as Himachal Pradesh and Haryana clocked a 0-3 percent growth in revenues. Uttarakhand clocked a negative growth, while revenues of Bihar and West Bengal have fluctuated from 30 percent-plus growth to 6-10 percent growth levels during the said period.

Even for big states such as Rajasthan and Madhya Pradesh, the GST revenue trend has shown major fluctuations, probably indicating the collection trend has yet to stabilise fully.

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Selective compensation not easy

Given this scenario, sources told CNBC-TV18 the government might be needed to extend GST compensation beyond June for a few states, especially the hilly ones. In their opinion, an arrangement may need to be worked out by the GST Council.

However, the constitution guarantees compensation for GST shortfall to all states and not a select few. Also, whichever state receives compensation after June, will eat into the revenue share of other states. Even widening the number of items for levying compensation cess or increasing the sin goods rate of 28 percent are not feasible options.

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Backlog of unpaid GST compensation 

There is also the possibility of the GST compensation backlog stretching till July FY23 when the guaranteed support ends.

According to sources, an estimated backlog of Rs 30,000-40,000 crore may be carried over into the next fiscal year, given the previous year’s unpaid liabilities due to poor collections, compounding impact of 14 percent guarantee, and the fact that the Central government borrowed only Rs 1.10 lakh crore in FY21 to meet the compensation shortfall for states.

In the next fiscal year, the Centre will settle dues for February 2022 till June 2022. Budget 2022-23 allocated Rs 1.20 lakh crore as compensation cess. One lakh crore of this could be used to pay the compensation dues to states and the remaining may be used to service the back to back GST loans. Anything over the estimated Rs 1.40 lakh crore of compensation dues will be settled in FY24.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

About Rs 52,000 cr GST compensation pending to states till Sept: FinMin to Lok Sabha

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Nearly Rs 52,000 crore of GST compensation was due to the states as of September 2021, Parliament was informed on Monday. Giving details of Goods and Services Tax (GST) compensation released and pending to be released as on November 24, 2021, Minister of State for Finance Pankaj Chaudhary said in the Lok Sabha that Rs 1,10,208 crore and Rs 1.59 lakh crore was released to the states as back to back loan in 2020-21 and 2021-22 fiscals, respectively.

Total GST compensation pending till September 2021 stood at Rs 51,798 crore, he said. This includes Rs 13,153 crore pending to Maharashtra, Rs 5,441 crore to Uttar Pradesh, Rs 4,943 crore to Tamil Nadu, Rs 4,647 crore to Delhi and Rs 3,528 crore to Karnataka. States of Arunachal Pradesh, Manipur, Mizoram and Nagaland do not have any GST compensation pending from the Centre.

In reply to a separate question, Chuadhary said the Centre has released Rs 17,000 crore on November 3, 2021, towards GST compensation to states from the compensation fund. This is in addition to GST compensation of Rs 43,303 crore released to states and Rs 1.59 lakh crore as back to back assistance during the current financial year. “During 2020-21 (April 2020- March 2021), the Centre had released compensation of Rs 1,36,988 crore and back to back loan assistance of Rs 1.1 lakh crore,” he said.

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Under the GST law, states are compensated for any loss of revenue arising on account of implementation of GST for five years till June 2022. The compensation amount to be paid from the compensation fund which is arrived at by levying cess on top of the highest tax slab on luxury, demerit and sin goods. GST compensation for financial years 2017-18, 2018-19 and 2019-20 has already been paid to the states.

Chaudhary said the economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. Since collections in the compensation fund are falling short of requirement, for 2020-21 and 2021-22 fiscals the Centre has borrowed funds worth Rs 1.10 lakh crore and Rs 1.59 lakh crore, respectively and passed it on to the states as back-to-back loans.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Centre releases Rs 17,000 crore as GST compensation to states/UTs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government on Wednesday released GST Compensation of Rs 17,000 crore to states. The total amount of compensation released to the states/UTs so far including the aforesaid amount during the year 2021-22 is Rs 60,000 crore.

As per the decision of GST Council, it has been decided by the central government that it would borrow Rs 1.59 lakh crore in 2021-22 and release it to states and UTs with legislatures on a back-to-back basis to meet the resource gap due to the short release of compensation on account of the inadequate amount collected in the Compensation Fund.

This amount is as per the principles adopted for a similar facility in FY 2020-21, where an amount of Rs 1.10 lakh crore was released to states under a similar arrangement.

This amount of Rs 1.59 lakh crore to be provided to states as back to back loans would be over and above the compensation, in excess of Rs 1 lakh crore (based on cess collection), that is estimated to be released to states/UTs with the legislature during the current financial year. The sum total of Rs 2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow