Central Govt to pay states Rs. 63000 cr for GST shortfall

The Centre sought Parliament’s approval for extra spending of Rs 85,315 crore, a large chunk of which will be used to compensate states for revenue losses due to rollout of the goods and services tax (GST) and phasing out of the central sales tax.

The government presented the fourth supplementary demand for grants in Parliament and out of the total cash spending, it sought approval for Rs 62,716 crore to compensate states and Union territories due to revenue shortfall after GST rollout. This is a transfer from the compensation fund to the public account where GST cess on tobacco, soft drinks, luxury cars and coal is parked.

Although the money is paid for “revenue loss”, many states, which have higher collections than last year, will also receive compensation. Although the money is paid for “revenue loss”, many states, which have higher collections than last year, will also receive compensation as the Centre had guaranteed 14% growth in revenues for five years. GST collections have been lower than anticipated as several anti-evasion measures are yet to be implemented.