Ahead of Sitharaman’s pre-Budget meet, Centre releases Rs 17,000 crore as GST compensation | The Financial Express

Ahead of Sitharaman’s pre-Budget meet, Centre releases Rs 17,000 crore as GST compensation

This was despite the fact that there was only about Rs 25,000 crore in the GST Compensation Fund, the Finance Ministry noted.

Ahead of Sitharaman’s pre-Budget meet, Centre releases Rs 17,000 crore as GST compensation
“The total amount of compensation released to the States/UTs so far, including the aforesaid amount, during the year 2022-23 is Rs 1,15,662 crore,” the finance ministry said in a statement on Friday.

The Centre has released Rs 17,000 crore to the States and Union Territories as the balance compensation for the goods and services tax (GST) for the period, April-June 2022.

The funds were released a day ahead of the Union Finance Minister Nirmala Sitharaman’s pre-Budget meeting with State Finance Ministers on Friday.

“The total amount of compensation released to the States/UTs so far, including the aforesaid amount, during the year 2022-23 is Rs 1,15,662 crore,” the finance ministry said in a statement on Friday.

With this release, the Centre has paid in advance, the entire amount of cess estimated to be collected this fiscal and which would have been available for payment as compensation to States.

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While the total cess collection till October this year was only Rs 72,147 crore, the ministry said the balance Rs 43,515 crore is being released by the Centre from its own resources.

“This decision was taken to assist the States in managing their resources and ensuring that their programmes especially (the capital expenditure) is carried out successfully during the financial year,” the ninistry said.

The Centre had previously in May this year released Rs 86,912 crore as provisional GST compensation to States for the period February to May 2022 by making arrangement of funds of around Rs. 62,000 crore from its own resources.

This was despite the fact that there was only about Rs 25,000 crore in the GST Compensation Fund, the Finance Ministry noted.

GST compensation was to be paid for a five-year period to States as part of the transition to the new indirect tax regime to meet any losses that may arise. The compensation mechanism, which is guaranteed under the Constitution, revenues of States are protected at 14% growth rate per annum over the base year revenue of 2015-16.

The compensation started from July 1, 2017 and came to an end on June 30 this year.

A number of States have sought an extension in the compensation payment at the pre-Budget meeting with the Union Finance Minister.

According to the Finance Ministry statement, Rs 2,081 crore was paid as GST compensation to Maharashtra while Rs 1,915 crore was paid to Karnataka and Rs 1,202 crore to Uttar Pradesh. Delhi received Rs 1,200 crore as GST compensation, Tamil Nadu received Rs 1,188 crore and Punjab Rs 984 crore.

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First published on: 26-11-2022 at 00:45 IST