Gujarat seeks GST compensation cess due from Centre

By: |
April 08, 2020 3:45 AM

The Centre has a target to collect Rs 1 trillion in GST cess during the current financial year.

The Centre has a target to collect Rs 1 trillion in GST cess during the current financial year.

The Gujarat government has asked the Centre to release GST compensation cess of nearly Rs 5,000 crore due to it for the period of over four months. Sources in the state finance department said that a representation has already been made before the concerned authority to release money as early as possible. In the last meeting of GST council held on February 18th, the state government representatives had made an oral as well as a written representation to the concerned authorities for the release of funds, said a senior official requesting anonymity.

Following the implementation of Goods & Services Tax (GST) by the Centre, compensation cess is levied for making up for any shortfall in states’ revenue. The shortfall is calculated assuming a 14% annual growth in GST collections by states over the base year of 2015-16.

According to the official, the Centre released 50% compensation cess for the month of October and since then there has been no payment made to Gujarat. It means, payment is due since November 2019 till March 2020, said the sources.

In order to pay compensation dues to states, the central government has created a separate corpus by levying 2% cess on GST, informed the official, adding that currently around Rs 35,000 crore fund is lying in the corpus. The official also said that Gujarat is one of the few states with higher collection of GST but looking at current situation, it may hardly receive Rs 2,500 of the total due amount.

The officials further said that due to ongoing fight against Covid-19, not only Gujarat but many other states, including Kerala, Rajasthan, Bihar, Punjab and Tamil Nadu have also demanded for release of due amount under GST compensation cess.

The Centre has a target to collect Rs 1 trillion in GST cess during the current financial year. The official said that the target was set before the spread of coronavirus pandemic, but now the situation has changed and it would be difficult to achieve the target set by the Centre as there would be major drop in GST collections due to ongoing lockdown.

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