Finance Minister Nirmala Sitharaman on Saturday announced that the Centre will immediately clear all pending dues related to GST compensation to States from its own pocket as no money was available in the Compensation Fund.

There are two components under the compensation that were being released by the Centre on Saturday. First is related to the pending GST compensation for June 2022 for which all States and UTs (with legislature) together will get ₹16,982 crore. Total due in the said month was around ₹34,000 crore, nearly half of which was paid earlier.

Second component of payment being made is the admissible final GST compensation, of ₹16,524 crore, being released to six States and UTs who have provided the revenue figures as certified by the Accountant General (AG).

“We have announced that the entire due on the pending balance of the GST compensation will be cleared as of today. In other words, the entire pending balance of the GST compensation will be cleared,” Finance Minister Nirmala Sitharaman said while addressing a press conference post the meeting of GST Council.

She further said, “Although this amount is not really available in the compensation fund as of today, we have decided to release this amount from our own resources and the same amount will be recouped from the future compensation cess collection.” With this release, the Centre cleared the entire provisionally admissible compensation cess dues for five years as envisaged in the GST (Compensation to States) Act, 2017, she said.

The Centre also informed that compensation dues are being processed for States/UT, which have submitted AG certificates. However, there are some States which have not yet submitted AG certificates and their dues are pending. Once they submit, the dues will be paid. The government clarified that amount pending is not more than 10 per cent of total compensation dues.

Measures for compliance

Meanwhile, the GST Council recommended lowering the late fee for Annual Return in FORM GSTR-9 for FY 2022-23 and onwards. Registered persons having an aggregate turnover of up to ₹5 crore will now have to pay late fee at the rate of ₹50 per day, subject to a maximum of an amount calculated at 0.04 per cent.

Registered persons having an aggregate turnover of more than ₹5 crore, and up to 20 crore, will be required to pay late fee at the rate of ₹100 per day subject to a maximum of an amount calculated at 0.04 per cent of his/her turnover. At present, the late fee is ₹200 per day subject to a maximum of 0.5 per cent of the turnover.

The Council also recommended amnesty with respect to pending returns in FORM GSTR-4 (for composition scheme), FORM GSTR-9 (annual return for all assesses and FORM GSTR-10 (Final return for cancelled or surrendered GSTN) by way of conditional waiver/reduction of late fee.

Commenting on changes in compliances, Aditya Singhania, Partner at Singhania’s GST Consultancy & Co, said these will especially help the MSMEs, beside others. “Now, one really needs to be vigilant enough to file all their past annual/final returns without waiting any further in light of the fact that the government has made a proposal vide Finance Bill, 2023 to restrict the filing of such returns after the end of three years from their due dates of filing. It will be difficult for taxpayers who have already done compliance by depositing such late fees to claim refund of the same as the waiver is more of an amnesty,” he said.

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