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Centre Releases Rs.36,400 Crore as GST Compensation to States

GST Compensation

Taking stock of the current situation due to COVID-19 where State Governments need to undertake expenditure while their resources are adversely hit, the Central Government has released the GST Compensation of Rs.36,400 crore to the States/UTs with Legislature for the period from December, 2019 to February, 2020 today.

The  GST Compensation of Rs.1,15,096 crore for period April-November, 2019 had already been released by the Central Government to the States/ UTs with Legislature.

The Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy Compensation cess for providing compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force (01/07/2017), for a period of five years.

The growth rate of revenue for a State during the five-year period was assumed at 14 percent a year. Compensation is paid bi-monthly while the last installment for any financial year is given in the next year.

The compensation cess is a cess that will be collected on the supply of select goods and or services or both till 1st July 2022. The cess will compensate the states for any revenue loss on account of the implementation of GST. This cess will not be payable by exporters and those persons who have opted for compensation levy. The input tax credit of this cess can be only used to pay compensation cess and not the other taxes like CGST, SGST, or IGST.

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