Ahead of 38th GST Council Meeting, the Centre on Monday released one more tranche of compensation cess to States amounting to ₹35,298 crore to States and Union Territories.

The Council is scheduled to meet on December 18 and it is expected to be stormy on the issue of compensation. Now, it seems, the Centre has sensed that and accordingly released before the meeting.

Earlier this month, the Opposition ruled States have upped the ante for immediate release of GST Compensation Fund, which they get from the Centre in lieu of revenue shortfall. States claim total dues could be ₹50,000 crore or even more.

According to the GST Compensation Act, States and UTs with Assemblies are guaranteed compensation if the GST revenue growth is less than 14 per cent. The amount is paid bi-monthly.

This fund gets money through compensation cess levied on goods and services which attract 28 per cent GST. The cess rate varies from one per cent to 25 per cent and is levied over and above the GST rate.

A recent communication from the GST Council to States said that the Council in its next meeting on December 18 will discuss the revenue position in detail as lower GST and compensation cess collections have been a matter of concern in the last few months.

“The compensation requirements have increased significantly and are unlikely to be met from the compensation cess being collected,” the communication said.

Missing the target

Also, the Council has sought suggestions, inputs or proposals on measures, compliance as well as rates to help augment revenue.

Both the Centre and States are worried about GST collection so far. After two months of contraction, GST revenues witnessed a recovery with a 6 per cent growth in November 2019 year-on-year. However, the total collection during the year so far is still below the estimate.

Though, GST collection on domestic transactions witnessed a 12-per-cent growth, on imports its contraction continued at (-)13 per cent.

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