Government clears 100% of state GST offset assessments

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The government has erased all state GST dues to date

New Delhi:

The government has cleared the entire Goods and Services Tax (GST) offset payable till date by releasing Rs 86,912 crore to the states, the Ministry of Finance announced on Tuesday.

Of this amount, Rs 25,000 crore is released from the GST compensation fund and the balance of Rs 61,912 crore is released by the Center from its own resources pending collection of the tax.

Of the total compensation released, Rs 17,973 crore corresponds to the April and May dues, Rs 21,322 crore corresponds to the February to March dues and Rs 47,617 crore corresponds to the balance of the compensation payable until January 2022.

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“Government of India has released the entire amount of GST compensation payable to the states till 31st May 2022 by releasing an amount of Rs 86,912 crore. This decision was made to help the states in managing their resources and to ensure that their programs, especially the capital expenditures are successfully completed during the fiscal year,” the ministry said in a statement.

The GST was introduced in the country with effect from July 1, 2017 and states were assured of compensation for loss of revenue arising from the implementation of the GST for a period of five years.

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To provide compensation to states, a tax is levied on certain goods and the amount of tax collected is credited to the compensation fund.

The semi-monthly compensation of GST to the States for the period 2017-2018, 2018-2019 was released on time from the compensation fund.

While protected state revenue increased by 14%, while tax collection did not increase in the same proportion, COVID-19 further widened the gap between protected revenue and actual revenue, including including reduction in tax collection.

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In order to bridge the lack of resources of states due to the short release of compensation, the Center has borrowed and released Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 in the form of back-to-back loan to meet part of the shortfall in the collection of cess.

In addition, the Center has also released regular GST compensation from the fund to cover the shortfall.

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