Rs. 17,000 crore of GST compensation to States/UTs released by Centre

 Rs. 17,000 crore of GST compensation to States/UTs released by Centre

The Centre has issued Rs 17,000 crore to the States and Union Territories to offset the Goods and Services Tax (GST) balance between April and June 2022. The funds were released a day before Union Finance Minister Nirmala Sitharaman’s pre-budget meeting with state finance ministers.

 “The total amount of compensation paid to the States/UTs to date, including the aforesaid amount, in 2022-2023 is Rs 1,15,662 crore,” the finance ministry said.

With this release, the Centre has prepaid the full amount of tax it estimated to be collected this fiscal year, and this amount will be available for payment as compensation to the States. While the total proceeds until October of this year were only Rs 72,147 crore, the ministry said a balance of Rs 43,515 crore had been released by the Centre from its own resources. “This decision was made to help states manage their resources and ensure that their programs in particular (capital expenditures) are realized during the fiscal year,” the ministry said.

The Centre previously issued in May this year Rs 86,912. 86,912 crore as temporary GST compensation to the states between February and May 2022 by arranging an amount of approximately Rs 62,000 crore from its own sources. The Ministry of Finance notes that this is despite the fact that there is only about Rs 25,000 crore in the GST compensation fund. GST compensation was paid over five years to the states as part of the transition to the new indirect tax regime to cover any losses. The compensatory mechanism, which is constitutionally guaranteed, protected states’ revenues at a growth rate of 14% per year over 2015-16 base year revenue. Compensation starts on July 1, 2017 and ends on June 30 of this year. Several states requested an extension of compensation payments during a pre-budget meeting with the Union Finance Minister.

According to the Ministry of Finance statement, Rs 2,081 crore was paid as GST compensation to Maharashtra, while Rs 1,915 crore was paid to Karnataka and Rs 1,202 crore to Uttar Pradesh. Delhi received Rs 1,200 crore GST compensation, Tamil Nadu received Rs 1,188 crore and Punjab Rs 984 crore.

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