Under fire, govt. releases ₹35,298 cr. in GST compensation

The GST Council, the highest decision-making body of the indirect tax regime, is slated to hold its meeting on December 18

December 16, 2019 07:14 pm | Updated June 08, 2020 10:35 pm IST - New Delhi

The Centre released ₹35,298 crore to the States in Goods and Services Tax (GST) compensation on Monday, just two days before a crucial meeting of the GST Council. The decision comes at a time when several States had  urged the Centre to transfer the compensation payments, which have been pending for several months, with the Punjab government warning that it was prepared to take the issue to the Supreme Court.

Speaking at an event earlier in the day, Finance Minister Nirmala Sitharaman sought to assure the States that the Centre would not renege on its promise to compensate them and explained that the delay  was because GST collections had been lower than expected.

Earlier this month, the Centre had written to States voicing concern that due to lower GST collections, the compensation cess might not be enough to pay for the losses arising out of the adoption of the tax system.

“The Central government has released GST compensation of ₹35,298 crore to States and Union Territories today,” the Central Board of Indirect Taxes and Customs said in a tweet on Monday afternoon. The GST Council, the highest decision making body of the indirect tax regime, is set to hold its next meeting on December 18.

States have expressed apprehensions about not getting their compensation on time or at all, with some alleging that they had to incur debts to meet the expenses predicated on GST compensation monies. While the Congress government in Punjab had threatened to take the Centre to court, Chhattisgarh Chief Minister Bhupesh Baghel had asked the Centre to consider extending the cut-off date for compensation, according to sources. In an editorial in its mouthpiece Saamana , the Shiv Sena, which heads the government in Maharashtra, asserted that the failure to pay compensation had resulted in “economic anarchy” and warned that it could lead to a new struggle between the Centre and States if the payments were not made immediately.

While the government had budgeted for ₹6,63,343 crore in GST collections for the current financial year, 2019-20, it had garnered only about 50% of its budget estimate in the first eight months. In terms of compensation cess collections, against the target estimate of ₹1,09,343 crore, only ₹64,528 crore had been collected till November end.

The dip in collections could be attributed to a slide in GST filings due to natural calamities and also due to a slowdown in consumption that had a direct impact, Press Trust of India reported Ms. Sitharaman as having told participants at the event earlier on Monday.

“I admit that the payments which had to go the compensation head have not been given for two months slot. I do not want them [States] to feel embarrassed because it’s not their fault nor is it personally my fault,” PTI quoted as having said. “It is certainly their right, I am not denying. At the same time, I am also making it clear to say that I am not reneging on that. States will be given. We are certainly not reneging on it.”

She added that there was no plan to review GST rates in the December 18 meeting of the GST Council.

(With inputs from PTI)

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