News

The GST compensation imbroglio

The GST compensation imbroglio

The impact of the pandemic on the revenue receipts of the Central and state governments has been devastating. The total average collection of GST revenue in April and May is only Rs 94,323 crore, just 46 per cent of the previous year’s average bimonthly receipts. The states have been guaranteed 14 per cent annual growth in GST revenue over the base year of 2015-16. Any shortfall has to be compensated from the receipts of Compensation Cess imposed on selected commodities that attract a GST of 28 per cent .

The Compensation Cess Fund had already been under severe stress as the GST revenues have been far from buoyant. The increase in revenue in 2019-20 has been a meagre 3.8 per cent compared to the previous year. The result is that even after paying Rs 1.2 lakh crore as compensation, the payments were three months in arrears at the end of the financial year. And now with the pandemic, the fund requirement for compensation has dramatically increased. The payments are in arrears by more than Rs 1 lakh crore already.

Top