Lok Sabha Question No. 1697 (UNSTARRED), answered on 2023-02-13
Subject: Period for GST Compensation
Ministry: FINANCE
Asked by: Kotagiri Sridhar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO-1697

TO BE ANSWERED ON MONDAY, THE 13 TH  FEBRUARY, 2023

## PERIOD FOR GST COMPENSATION

1697.  SHRI SRIDHAR KOTAGIRI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has refused to increase the period for GST compensation beyond 2022 despite requests for extension from multiple States;
- (b) if so, the details thereof and the reasons therefor;
- (c)  whether  the  Government  is  aware  that  most  of  the  States  have  reportedly  suffered financial  losses  during  the  pandemic  and  if  so,  the  details  thereof  and  the  reaction  of  the Government thereto;
- (d) whether the Government proposes to alleviate the financial burden of the States; and
- (e) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## THE MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a)  to  (c):-  A  few  States  have  requested  for  extension  of  payment  of  GST  compensation beyond transition period of five years. As per section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five  years  can be provided by a law made by Parliament. Central  Government is committed for payment of GST  compensation  to  States/UTs  for  five  years  as  per  law  enacted  by  the  Parliament according to the Constitutional provision.

Taking into account release of ₹ 1.10 lakh crore for FY 2020-21 and ₹ 1.59 lakh crore for FY 2021-22 to States/UTs as back to back loan in lieu of GST compensation,  the entire GST compensation  dues  of  States/UTs  as  per  provision  of  GST  (Compensation  to  States)  Act, 2017 has been cleared by Central Government for the period up to 31.05.2022. During 202223,  Central  Government  released  full  compensation  up  to  31.05.2022  despite  insufficient amount in the Compensation Fund, by meeting the required balance from its own resources to the extent of ₹ 62,000 crore in May 2022, and ₹ 17,000 crore again in November 2022 to partly meet compensation due for June, 2022, to assist the States in managing their resources.

(d) & (e):- The Government, on the recommendations of the GST Council, has taken several measures  to  increase  the  tax  base  and  improve  the  tax  compliance.  Monthly  gross  GST collection has shown great buoyancy in the current year. In the current financial year up to January  2023,  the  average  monthly  GST  collection  is  Rs.1.49  lakh  crore  as  compared  to Rs.1.20 lakh crore for the same period last year which is 24% higher than the same period last year.

In  order  to  boost  capital  expenditure  by  the  States,  fifty year  interest  free  loan  of Rs.11,830.29 crore and Rs.14185.78 crore was released to States during FY 2020-21 and FY 2021-22  respectively  under  the  'Scheme  for  Special  Assistance  to  States  for  Capital Expenditure'. In addition, capital projects of Rs. 84,920.62 crore have been approved and an amount of Rs.45,976.87 crore have already been released to the States during FY 2022-23 so far (up to 08.02.2023) under 'Scheme for Special Assistance to States for Capital Investment for 2022-23'. This amount is over and above, the normal net borrowing ceiling.

Union Government allowed additional borrowing limit of up to 2 percent of GSDP over and above  the  normal  borrowing  limit  of  3%  of  Gross  State  Domestic  Product  (GSDP)  to  the States for the year 2020-21. Out of this 2 percent, additional borrowing permission for a total amount aggregating to Rs.3,19,939 crore was allowed to the States during the year 2020-21. Further, based on the recommendations of 15 th   Finance Commission, enhanced normal Net Borrowing Ceiling  (NBC)  of  4%  of  GSDP  and  3.5%  of  GSDP  was  allowed  to  the  States during FY 2021-22 and FY 2022-23 respectively. In addition, additional borrowing of up to 0.50% of GSDP is also available to States for performance in power sector for each year for a four year period from FY 2021-22 to FY 2024-25.

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