On Monday this week, Mr. Anurag Singh Thakur who is the Union Minister of State for Finance said that the GST collection for the period of the months April to August 2020 has decreased because of the lockdown imposed due to Covid-19 pandemic, and therefore the GST compensation which is due to the states stands at Rs.1.51 lakh Crores.

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The provisional GST compensation due to States and Union Territories (UTs) for the year 2020-21 was highest for the state of Maharashtra for Rs.22,485 Crores which is followed by Karnataka at Rs.13,763 Crores then Uttar Pradesh for Rs.11,742 Crores, Gujarat at Rs.11,563 Crores and Tamil Nadu at Rs.11,269 Crores.

The compensation due to West Bengal stands at Rs.7,750 Crores, Kerala for Rs.7,077 Crores, Punjab at Rs.6,959 Crores, Delhi for Rs.6,931 Crores, Rajasthan at Rs.6312 Crores, for Telangana is Rs.5,424 Crores and for Chhattisgarh is Rs.2,827 Crores.

The total provisional GST compensation due to 31 states and UTs for 2020-21 put together stands at Rs 1,51,365 crore, as per data shared in a written reply to a question in the Lok Sabha.

The actual net GST collection for the Centre till August 2020 is Rs.1,81,050 Crores, which shows 26.2 per cent of the Budget Estimates(BE).

“The BEs for FY 2020-21 of GST in the Union Budget, 2020-21 were projected on the basis of the assumption of higher growth of GDP, however as per CSO, MoS&PI … the Nominal GDP for Q1 (April-June), 2020-21 shows a contraction of 22.6 per cent which is one of the major reasons for the revenue shortfall in GST.

Mr. Anurag Singh Thakur said, “Other reasons for low tax collection inter-alia include nationwide lockdown measures implemented since March 2020 consequent to global COVID-19 pandemic which led to limited economic activities, extension of GST return filings timelines without payment of interest, late fee or penalty etc.”

He also said that the issue of pending compensation and future course of action to meet the shortfall was discussed in the 41st GST Council meeting on August 27 wherein states were given two options to meet their GST compensation shortfall for the current fiscal year from market borrowing.

He further added, “It was also decided that states will give their preference views thereon. Thereafter on finalisation of the scheme, states can choose either Option 1 or Option 2 and accordingly, their compensation, borrowing, repayment etc will be dealt as per their individual choice.”

According to the provisions mentioned in Section 7 of the GST (Compensation to States) Act, 2017 loss of revenue to the States shall be calculated and released at the end of every two months, for a period of 5 years.

Consequently, admissible GST compensation for the period April 2019 to March 2020 has been released to all States/ UTs including Tamil Nadu. Due to shortfall in the GST Compensation Cess collection in the current financial year, GST compensation is therefore yet to be paid for the period April-July, 2020.

With Warm Regards,

CL Bureau.

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