Centre clears over half of pending GST dues to states

The finance ministry told Parliament on Wednesday that the unpaid GST compensation to states for the year 2020-21 stood at Rs 37,134 crore, 54% lower than what was reported in September 2021.

GST collections, which have been steady in recent months, came in at Rs 1,31,526 crore in November (October sales) 2021, the second-highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.
GST collections, which have been steady in recent months, came in at Rs 1,31,526 crore in November (October sales) 2021, the second-highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

Aided by the robust goods and service tax (GST) receipts over the last few months, the Centre has recently transferred about Rs 44,000 crore to states towards their pending GST compensation dues for FY21, sources told FE.

The finance ministry told Parliament on Wednesday that the unpaid GST compensation to states for the year 2020-21 stood at Rs 37,134 crore, 54% lower than what was reported in September 2021.

The ministry had earlier estimated that if monthly GST collections average at Rs 1.15 lakh crore, the deficit in the designated cess kitty to compensate states for the current financial year would be about Rs 1.25 lakh crore against the provision of Rs 1.59 lakh crore back-to-back loan mechanism to cover the deficit.

The average monthly GST collection in the first eight months of the current financial year has been Rs 1.17 lakh crore.
On October 28, the Union government released Rs 44,000 crore to states to bridge their GST revenue shortfall, fully achieving the target to release Rs 1.59 lakh crore under the special back-to-back loan mechanism for the current fiscal.

While the amount borrowed under the RBI-enabled mechanism last year was Rs 1.1 lakh crore, the Centre acknowledged in Parliament in September that an amount of Rs 81,179 crore was yet to be released to the states then, towards fully compensating them for their GST revenue shortfall for FY21.

GST collections, which have been steady in recent months, came in at Rs 1,31,526 crore in November (October sales) 2021, the second-highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

The GST cess proceeds fell short of the states’ compensation requirement for the first time in FY21, thanks largely to the pandemic but also because of the series of rate cuts that brought down the weighted average GST rate to around 11%, as against a revenue-neutral rate of around 15% seen before the July 2017 launch of the destination-based consumption tax.

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