GST payout feud likely to resurface
States are expected to raise concerns over inadequate GST compensation once again as the 15th Finance Commission has estimated the shortfall in the payout at Rs 7.1 lakh crore for the period April 2020 to June 2022.
The issue is likely to be raised at the GST Council meeting which is expected before the end of March.
Discomfort among the states is growing with Covid-19 continuing to wreak havoc on their revenues and the Union budget making no mention of how they will be compensated for the shortfall.
As the compensation cess fund will not be sufficient to meet the Centre’s obligation, the GST Council has to decide whether or not to extend the current arrangement to make up for the shortfall of states with debt, officials said.
The Council also has to decide on deferring part of the compensation payment for 2021-22 and the June quarter of 2022-23 for a later period as well as offering liquidity support by way of debt for that period, the officials said.
The Fifteenth Finance Commission has estimated the shortfall in the collection of state GST vis-a-vis the assured collection at Rs 7.1 lakh crore for the 27 months April 2020 to June 2022.
“From our projections of collections from GST compensation cess, it turns out that the compensation cess fund will have an amount of only Rs 2.25 lakh crore by that time, from the collections of 2020-21 to Q1, 2022-23,”it said.
The commission indicated that “the shortfall in the requirements of compensation till Q1 2022-23 will be met by extending the levy of GST compensation cess till the year 2025-26”. “In the interim, the transitional requirements of liquidity of the States could be met from borrowings, either by the Union or by the states,” it said.