GST Council meeting: Will states corner Centre over pending compensation?

New Delhi, Aug 27: The Centre, in the end of July, paid the last tranche of Goods and Services Tax (GST) compensation to the states. With this the total GST compensation paid to the states for 2019-20 rose to Rs 1.65 lakh crore.

Affected by the novel coronavirus pandemic, the states collectively need over Rs 3 lakh crore, according to estimates, in the ongoing financial year. They have been writing to the Centre seeking more GST compensation or permission to borrow as per they own suitability.

With its July release of the GST compensation to the states, the Centre exceeded its GST compensation cess collection by about Rs 70,000 crore. Its GST compensation cess collection for 2019-20 stood at Rs 95,444 crore.

The Centre could pay "extra" GST compensation as it had saved from the GST compensation cess collected in the previous two years. Earlier, the Centre had to pay less to the states as GST compensation than what was collected from the cess.

In 2017-18, the first year of GST in operation, the compensation cess collection stood at Rs 62,612 crore but the Centre paid only Rs 41,146 crore to the states.

In 2019, the compensation cess collection increased to Rs 95,081 crore but the Centre paid Rs 69,275 crore as GST compensation to the states in 2018-19.