GST Compensation Cess May See Rs 63,000 Crore Shortfall

New Delhi: The centre is staring at a Rs 63,200-crore shortfall in goods and services tax compensation cess for FY20 as revenues slow down. Delay in release of compensation to states has already emerged as a bone of contention between Centre and states.

As per a presentation made to the GST Council, the compensation requirement for states is expected to be about Rs 1.6 lakh crore for the ongoing fiscal, at a growth rate of 5%. However, compensation cess collections are expected to be about Rs 96,800 crore, leading to a huge shortfall.

The required collections have more than doubled over the previous fiscal – from Rs 69,275 crore – while actual collections have remained almost flat on the back of slowing economy.

Compensation cess collection for FY 2018-19 was Rs 95,081 crore, just marginally lower than Rs 96,800 crore that is expected this fiscal ending March 2020.

The centre had released Rs 35,298 crore as compensation to states for August and September period just two days ahead of the GST Council meeting on December 18. Payment was released after some opposition ruled states including Kerala, West Bengal threatened to approach the Supreme Court over the delay in release.

The issue was discussed in detail at the meeting and a detailed presentation waa made before the Council, an official said.

Rating agency ICRA has estimated a shortfall of Rs 2.2 lakh crore for all states. Finance minister Nirmala Sitharaman had stated in Rajya Sabha that in 2017-18, the total cess collected was Rs 62,596 crore, of which Rs 41,146 crore was released to states. The rest Rs 15,000 crore was accumulated in the Cess Fund. In the next year, Rs 95,081 crore was collected and Rs 69,275 crore released to states but “cess accumulated was zero,” she had said.

Source: Economic Times