Finance Minister Nirmala Sitharaman on Monday informed the Lok Sabha that a few states including Telangana have sought a five-year extension for the compensation paid to them for revenue shortfall due to GST implementation.
As per section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, Parliament shall, by law, on the recommendation of the Goods and Services Tax (GST) Council, provide for compensation to the states for loss of revenue arising on account of implementation of the goods and services tax for a period of five years.
When a nationwide GST subsumed 17 central and state levies from July 1, 2017, it was decided that states will be compensated for any loss of revenue from the new tax for five years. That timeframe has ended on June 30 this year.
GST Council, in its 42nd meeting, has recommended extending the period of levy of GST Compensation cess beyond June 2022 to cover the entire shortfall as well as servicing the back-to-back loan released to states to meet their resource gap due to the short release of compensation, she said in a written reply to Lok Sabha.
Centre borrowed `1.1 lakh crore in 2020-21 and `1.59 lakh crore in 2021-22 as back-to-back loans to meet part of the shortfall in cess collection, she said.
In addition, she said, the government of India has further released `86,912 crore to states/UTs on May 31, 2022 and cleared the entire provisionally admissible GST compensation due till May, 2022.
This decision was taken to assist the states in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year, she said. This decision has been taken despite the fact that only about `25,000 crore was available in the GST Compensation Fund, she said, adding, the balance `62,000 crore was released by the Centre from its own resources pending collection of cess.
As a result of the continued reforms in GST undertaken by Centre and states, on the recommendations of the GST Council, the finance minister said, buoyancy in GST revenue has been achieved in the recent months.
The average monthly gross GST collection for the first quarter of FY23 has been `1.51 lakh crore against the average monthly collection of `1.10 lakh crore in the first quarter of the last financial year, showing an increase of 37 per cent.
In reply to another question, the Finance Minister said, global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions are the major reasons for the weakening of the Indian rupee against the US dollar.
