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Undue Protection? State GST ‘shortfall’ for March-May at a whopping Rs 80,000 crore

Undue Protection? State GST ‘shortfall’ for March-May at a whopping Rs 80,000 crore

Despite the recent release of Rs 36,500 crore by the Centre from the integrated GST pool, the state governments will require to be paid a whopping Rs 80,000 crore more as compensation for their State Goods and Service Tax (S-GST) shortfall in the March-May period, going by the formula of 14% assured annual revenue growth.

What has inflated the compensation requirement is a sharp fall in revenue in April-May due to the Covid lockdown: the gross GST collections shortfall during the two months was over 50%. Given that the monthly protected S-GST revenue under the compensation mechanism is Rs 63,700 crore for FY21, the shortfall in the state’s revenue in the first two months of this fiscal is roughly the same, if not slightly higher. Add another Rs 13,000 crore of unpaid S-GST compensation dues for March and the states’ claims for the March-May period approach the Rs 80,000-crore mark.

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