FinMin explains to Parliamentary committee the difficulty in payment of GST compensation

Our Bureau New Delhi | Updated on July 28, 2020 Published on July 28, 2020

The Finance Ministry officials informed the Department related Standing Committee on Finance that it would not be easy to pay GST compensation according to existing rules and regulations.

The Committee, under the Chairmanship of Jayant Sinha, met here on Tuesday. It was called to record “Oral evidence of the representatives of the Ministry of Finance (Departments of Revenue and Economic Affairs) and Ministry of Commerce (Department for Promotion of Industry and Internal Trade) on the subject ‘Financing the innovation ecosystem and India’s growth companies’. According to sources, officials from both the ministries made presentation on the current economic situation, revenue position and various policy measures.

Sources informed that the Finance Ministry officials explained the difficulty in payment of GST compensation. This response came day after the Centre announced that total payout for the FY 2019-20 stood at more than ₹1.65 lakh crore. It is almost 73 per cent more than the cess collection of nearly ₹95,500 crore.

To release the compensation for 2019-20, balance of cess amount collected during 2017-18 and 2018-19 was also utilised. In addition, the Centre had transferred ₹33,412 crore from the Consolidated Fund of India to the Compensation Fund as a part of an exercise to apportion balance of IGST pertaining to 2017-18.

After the introduction of GST, the Centre had assured the States, through legislation, of full revenue compensation for the first five years. It is paid bi-monthly and the last installment for a financial year is given in the next year.

For calculating the compensation amount, 2015-16 is taken as the base year. The growth rate of revenue for a State during the five-year period was assumed at 14 per cent a year.

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Published on July 28, 2020
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