Centre’s FY22 GST compensation amount should be higher than projected Rs 1.58 lakh crore: Opp-ruled states

The compensation amount promised by the Centre is estimated to be higher than the Rs 1.58 lakh crore projected by the Centre, and a special session of the GST Council will be convened to discuss it, three opposition-ruled states said on Sunday.

Finance ministers of Kerala, Punjab and Chhattisgarh said there was no consensus regarding the compensation requirement in 2021-22 in the May 28 GST Council meeting and a special session would be called only to discuss ‘Revenue Augmentation and Post June 2022 compensation’.

Punjab Finance Minister Manpreet Singh Badal said all states are facing shortfall in the range of 20-50 per cent and “we have said that the Council should be meeting every quarter to discuss the revenue situation of states”.

“The shortfall in compensation up to April is Rs 5,000 crore for Punjab. All opposition-ruled states spoke in one voice that the compensation amount from Centre should be higher,” Badal told PTI.

Punjab, he said, has been pitching for a discussion on the compensation mechanism that would be adopted after June 2022, as states continue to face revenue gap following the GST implementation than what was collected in the pre-GST times.

Kerala Finance Minister K N Balagopal said Rs 4,077 crore is due on account of compensation from the Centre and the Centre should ensure that the states get the 14 per cent promised growth in revenue.

“The 7 per cent revenue growth assumption is no assumption. Some states are facing negative growth, hence this assumption does not stand. We will discuss the issue,” Balagopal added.

Chhattisgarh Finance Minister T S Singh Deo said projections regarding compensation and borrowing were made by the Centre and a detailed discussion would happen at the special session of the GST Council, date for which has not been decided yet.

The Centre has estimated the compensation requirement of states at Rs 2.69 lakh crore for the current financial year. Of this, over Rs 1.11 lakh crore would come from cess on luxury, demerit and sin goods which will be given to the states to compensate them for the shortfall in revenue arising out of GST implementation , according to the agenda note circulated before the Council meeting.

The remaining Rs 1.58 lakh crore would have to be borrowed to meet the promised compensation, based on the assumption that a revenue growth of states would be 7 per cent this fiscal, the note added.

In the last fiscal 2020-21, the Centre had borrowed on behalf of the states and released Rs 1.10 lakh crore to compensate for the GST revenue shortfall. Another Rs 68,700 crore was collected by way of levy of cess.