GST compensation to Karnataka in phases: Centre

The Centre released Rs 1,603 crore on November 3 towards GST compensation to Karnataka from the Compensation Fund, Minister of State for Finance Pankaj Chaudhary informed Parliament on Wednesday.

This is in addition to GST compensation of Rs 10,369 crore released to the state to partly meet the compensation payable for the period April’20 to March’21 as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement, the Minister said in a written answer to question from BJP MP K C Ramamurthy.

As per the provisions of the GST (Compensation to States) Act, 2017, GST compensation for financial years 2017-18, 2018-19 and 2019-20 has already been paid to Karnataka, he said.

The economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess.

“The quantum of funds released to Karnataka as back to back loan was Rs 12,407 crore for FY 2020-21 and Rs 18,109 crore for FY 2021-22. The release of this amount has been front loaded during the financial year to enable States/UTs to undertake capital expenditure.

"In addition, depending on the amount available in the Compensation Fund, Centre has also been releasing the regular GST compensation to States to make up for GST revenue shortfall.

Taking into account, the GST compensation released from Compensation Fund as well as back-to-back loan released in FY 2020- 21 and FY 2021-22, GST compensation of Rs 3,528 crore for period April’20 to March’21 is due to Karnataka as per provisional figures,” the Minister said.

The Minister also said that no GST compensation is due for the period April-September 2021. The centre is committed to release full GST Compensation to the States/UTs as per GST (Compensation to States) Act, 2017 for the transition period by extending the levy of Compensation cess beyond 5 years to meet the GST revenue shortfall as well as servicing the loan borrowed through special window scheme, he said.

The issue of shortfall of cess collection into Compensation Fund and GST compensation to States/UTs due to economic impact of the pandemic has been deliberated in 41st, 42nd & 43rd GST council meetings, he added.

As per the decision of GST Council, Rs 1.1 lakh crore for FY 2020-21 & Rs 1.59 lakh crore for FY 2021-22 has been released to States/ UTs as back to back loan to meet the resource of the States/UTs due to shortfall in GST compensation.

This arrangement has been finalised after detailed deliberations with the States and all States have opted for this arrangement, the Minister said.

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