Centre to pay FY22 GST compensation of Rs 53,489 crore to States

According to the finance ministry, the state governments are still owed Rs 53,489 crore in goods and services tax (GST) compensation for the financial year 2021-22. Of the 31 states and union territories (UT), there were no pending payments to nine, data shared by the finance ministry shows. Maharashtra is owed the most at Rs 11, 563 crore, while Uttar Pradesh is a distant second at Rs 6,954 crore.

The compensation owed to state governments is for the April 2021-January 2022 period. It could be higher for the entire year. The Centre and states have sparred over the issue of GST compensation for some time now.

The law guarantees states 14 percent growth in revenue from GST for a five-year period until the end of June 2022. However, the pandemic crushed tax revenues and left the GST compensation cess fund dry, forcing the Centre to borrow from the market and pass on the funds to states.

The Centre borrowed Rs 1.10 lakh crore in FY21 and Rs 1.59 lakh crore in FY22 on behalf of the states to make up for the shortfall in GST compensation cess collections.

Minister of State for Finance Pankaj Chaudhary told the Lok Sabha in a written response, "The Centre is committed to release full GST Compensation to the States/UTs as per GST (Compensation to States) Act, 2017 for the transition period by extending the levy of compensation cess beyond five years to meet the GST revenue shortfall as well as servicing the loan borrowed through special window scheme."