Lok Sabha Question No. 22 (STARRED), answered on 2024-02-05
Subject: Financial Stability of States
Ministry: FINANCE
Asked by: Midhun Reddy

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA

## STARRED QUESTION NO-22

TO BE ANSWERED ON MONDAY, THE 05TH FEBRUARY, 2024, MAGHA 16, 1945 (SAKA)

## FINANCIAL STABILITY OF STATES

22. SHRI P. V. MIDHUN REDDY:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Union  Government  is  considering  any  additional  measures  to  support  the financial stability of States like Andhra Pradesh that rely heavily on GST revenue in view of the recent slowdown in GST revenue growth; (b) if so, the details thereof; (c) the steps taken/being taken to ensure timely release of GST compensation payments to States particularly with the phasing out of the compensation scheme in June 2026; (d)  whether  the  Union  Government  is  open  to  revisiting  the  GST  compensation  formula  to better address the concerns of States with lower-than average economic growth rates; and (e) if so, the details thereof?

## ANSWER

THE MINISTER OF FINANCE (MS. NIRMALA SITHARAMAN)

(a) to (e):  A statement is laid on the Table of the House.

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## STATEMENT REFERRED IN REPLY TO LOK SABHA STARRED QUESTION NO. 22 FOR ANSWER ON 05 TH  FEBRUARY, 2024, MAGHA 16, 1945 (SAKA)

(a) & (b):- GST revenue has been steadily growing and has shown robust growth. In the first 10 months of the current fiscal year, GST collections have grown at 11.6% y-o-y. Average monthly collections  in  this  year  has  been  Rs.1.67  lakh  crore.  GST  collections  of  Rs.1.74 lakh crore in the month of January 2024 is the second highest monthly collection ever.

States' revenues consist of State's own tax revenue from VAT, excise duty, stamp duty, etc in addition to GST revenues, share in other Central taxes and non-tax revenue.

As decided by the GST Council, States have been provided a total compensation of ₹ 9.14 lakh  crores  (including  ₹2.69  lakh  crores  as  back-to-back  loans)  as  compensation  for protecting their tax revenues post implementation of GST for the entire transition period of five years i.e., from 1st July,2017 to 30th June, 2022.

For the State of Andhra Pradesh, total compensation of ₹ 19,021 crore was provided for protecting the State's tax revenues  for  five  years  (July  2017  to  June  2022) post implementation of GST.

In  addition  to  funds  made  available  under  Centrally  sponsored  schemes,  the  Central Government has from time to time provided other grant-in aids, apart from interest-free fiftyyear loan, to the State of Andhra Pradesh.

(c):-  As  provided  under  applicable  law,  GST  compensation  payable  to  a  State is provisionally calculated and released at the end of every two months period, and shall be finally calculated for every financial year after the receipt of final revenue figures, as audited by the Comptroller and Auditor General of India. Government of India has already released the entire amount of provisionally admissible GST compensation to all States/UTs for the entire  transition  period  of  five  years  i.e.,  from  1st  July,2017  to  30th  June,  2022.  Final Compensation  arising  out  of  reconciliation  of  provisional  figures  with  audited  figures  is released on receipt of AG's certificate. No amount other than the final compensation due to be paid on receipt of AG's certificate is pending for release to the States/UTs.

(d) & (e):- GST Compensation is paid to the States as per the mandate of the Constitution (One Hundred and First Amendment) Act, 2016 and as per method prescribed under Goods and  Services  Tax  (Compensation  to  States)  Act,  2017  and  the  Rules  made  thereunder. Further, as per Article 279A of the Constitution of India, the GST Council, a constitutional body  makes  recommendations  to  the  Union  and  the  States  on  issues  related  to  GST. Government  of  India  takes  decision  based  on  the  recommendations  of  GST  Council  in which all the States are also members.

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