24.08.2022: Centre may soon release Rs 30,000 cr as GST compensation for June

The Centre may release about `30,000 crore soon as GST (goods and services tax) compensation for June 2022, the last month of the five-year guaranteed compensation pledged by the Union government, sources said.

However, the compensation amount will likely be released by the Centre from its own revenue stream, as there are not enough funds in the designated cesspool that is tapped for this purpose, the sources said.

The Centre is keen that capital expenditure by states, which tend to cut back on the asset creating spending as revenue expenditures such as interest payments and salaries doesn’t falter for want of funds.

It may also release some arrears against claims pertaining to previous financial years if states submit reconciled figures endorsed by their auditor generals.

While an official said no formal decision has yet been taken on the timing of the release, it is expected that the amount may be released ahead of the GST Council meeting next month.

“There is not much corpus in the cesspool. If June compensation is to be released, it may be at the discretion of the Central government from its funds (to be adjusted against future cess collections),” an official said.

To ease the liquidity of states to step up capital expenditure, the Centre on May 31 released `86,912 crore or the entire amount of GST compensation payable to states up to May 2022, by tapping its resources to the tune of `62,000 crore. This decision was taken as only about `25,000 crore was available in the GST Compensation Fund.

The GST Compensation to States Act provided for the release of compensation against 14% year-on-year growth over revenues in 2015-16 from taxes subsumed in GST for the first five years of the tax, which ended on June 30, 2022.

The Centre has budgeted `1.2 trillion in compensation cess collection for FY23, which will be used to compensate the states for shortfall in GST collection for April-June 2022 and interest on loans taken earlier to compensate states.

The Centre borrowed `1.1 trillion in FY21 and `1.59 trillion in FY22 as back-to-back loans to meet part of the shortfall in cess collection.

On June 24, The Centre issued a notification to continue levy and collection of GST compensation cess till March 2026 to repay the back-to-back loans released to states and for payment of GST compensation for June 2022 and arrears of previous financial years based on AG reconciled figures.

Source: Financial Express

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