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Shortfall in GST compensation payable to states in FY22 estimated at Rs 2.69 lakh crore

27 May 2021 Evaluate

The shortfall in Goods and Services Tax (GST) compensation payable to states in the current fiscal (FY22) is estimated at Rs 2.69 lakh crore, of which Rs 1.58 lakh crore would have to be borrowed this year. The Centre expects to collect over Rs 1.11 lakh crore through cess on luxury, demerit and sin goods which will be given to the states to compensate them for the shortfall in revenue arising out of GST implementation. The remaining Rs 1.58 lakh crore would have to be borrowed to meet the promised compensation to states under the GST regime.

As per the agenda note shared with states ahead of the GST Council meeting, the Centre estimates that although the GST revenues may see a recovery in the current financial year, there will still be a gap between the compensation need and amount raised through cess. The 2021-22 Budget had assumed 17 per cent growth in GST revenues, translating into monthly gross GST revenue of Rs 1.1 lakh crore. Based on this assumption, it has been estimated that for the period February 2021 to January 2022, the gap between protected revenue and the actual revenue after release of compensation would be around Rs 1.6 lakh crore.

In the last fiscal 2020-21, the Centre had borrowed on behalf of the states and released Rs 1.10 lakh crore to compensate them for the GST revenue shortfall. Another Rs 68,700 crore was collected by way of levy of cess. The GST Council is going to meet for the first time in more than seven-and-a-half months, on May 28, 2021.
 

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