• Notification Date: 11-05-2022
  • Notification No: N/A

Centre Refuses to Provide Further GST Compensation to States

The Central Government is about to pass a ruling about providing GST compensation to the states. It is anticipated that the Central Government would announce to quit granting further GST compensations to the states as they are no longer in the need of getting compensation from the government for the 2017 indirect tax reform.

The GST Council meeting will be held in this month and the final decision about granting GST compensation to the states would be taken in the meeting. It is expected for the Central Government to tell the individual state governments of India that the GST revenue collections in April have increased by 20 per cent. The revenue amount was more than the protected revenue growth rate of the states by 14 per cent which was backed by the GST compensation allotted by the Centre.

The large state economies of India, namely Maharashtra, Uttar Pradesh, Rajasthan, Haryana, and Gujarat have collected a large amount of revenue in the recent months.

According to the statement of an individual present in the discussion that happened between the Central and State governments, it has been suggested that some of the states are required to clear the formalities related to their state budget. After these formalities are done with, the next GST Council meeting will be conducted.

The state governments are still claiming their GST compensations beyond June 2022. The state governments have been made aware of the fact that the Centre will have to use the proceeds of GST cess collection for servicing the debts that have been taken in the last couple of years for making up the compensation shortfall. So, there is no possibility for the Central Government to exceed the period of GST compensation payments after June, 2022. The declaration made by the Central Government has been affirmed by a state government official, who spoke about the condition of anonymity.

According to the recent official data, the collection of tax on consumption in this year has gone up to a considerable extent. The reason behind this economic boost up is the recovery of private final consumption expenditure at current prices in Financial Year 22, growing by a high margin of 16 per cent annually.    

Online gaming and casinos are also being targeted by the policy makers. GST will be imposed on these segments at the rate of 28 per cent. They have been paying tax at the rate of 18 per cent as per the court orders due to the lack of any clarity in this matter. The policy makers are working on providing a clarification related to the applicability of the federal indirect tax on some of the specific categories of crypto currency transactions. These particular crypto currencies do not belong to either of the nature of goods or services.

According to the report, another group of ministers is planning to propose a GST rate rationalization. But the decision is yet to be finalized by the GST Council, considering the rising inflation in the country’s economy. Emails have been sent to the Ministry of Finance and the GST Council secretariat on Monday in this regard which remained unanswered during publishing the story.