Gap between requirement and collection of cess likely to go above ₹63,000 crore

The gap between requirement and collection of compensation cess could touch ₹63,200 crore at the end of current fiscal, a note for GST (Goods & Services Tax) Council meeting has disclosed. The meeting took place on December 18.

Compensation cess levied on goods and services fall in the rate category of 28 per cent. The amount collected through this cess is used under a guaranteed mechanism for five years where States and Union Territories with Assemblies are guaranteed compensation if the GST revenue growth is less than 14 per cent.

The amount is paid bi-monthly. Last week, the Centre released the third tranche of compensation to States amounting to ₹35,298 crore to States and Union Territories while ₹65,250 crore was paid between April and October this fiscal.

The note has listed three possible scenarios of GST collection growth of 5 per cent, 8 per cent and 10 per cent. In the first scenario, during the current fiscal, the gap could be ₹63,200 crore. If the growth rate remains at 5 per cent in next two fiscal years, then gap is estimated to over ₹1.26-lakh crore in 2020-21 and over ₹2.01-lakh crore in 2021-22.

In case of 8 per cent growth rate, then estimated gap will remain same during current fiscal, but could be over ₹1.08-lakh crore during 2020-21 and over ₹1.63-lakh crore in following years.

Under the third scenario, if the revenue growth rate touches 10 per cent, the gap between collection and requirement of collection cess is estimated at ₹96,360 crore and ₹1.36-lakh crore during 2020-21 and 2021-22 respectively. The gap is estimated to remain at ₹63,200 crore during current fiscal.

As collection through GST has been below expectations, there is pressure on paying compensation to States.

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