GST Compensation Not Enough to Pay Rs 61,000 Crore Arrears for April-January of FY21: ICRA

Goods Services Tax GST Concept

Investment Information and Credit Rating Agency (ICRA) has estimated that the GST compensation cess collections (Rs.1 lakh crore), some funds parked in the GST Compensation Fund (Rs.4700 crore) and back-to-back market loans (Rs.1.58 lakh crore) will be sufficient to meet Rs 2.63 lakh crore GST compensation shortfall for the period February 2021-January 2022, but it will not be enough to pay Rs 61,000 crore arrears for April 2020-January 2021.

Clarifying it, ICRA said that, the combined Revenue Protection (provides coverage top protect against loss of revenue caused by low prices, low yields, or combination of both) of all the states was Rs 8.72 lakh crore and the state GST (SGST) collections was Rs 6 lakh crore. Accordingly, ICRA estimated that the GST compensation requirement for FY22 (April-March) at Rs 2.7 lakh crore. Out of this, the proportionate compensation for the period April 2021-January 2022 is pegged at Rs 2.26 lakh crore, which is expected to be disbursed to the state governments in FY22 itself. The balance Rs 45,200 crore for February-March 2022 would be rolled over to FY23. The compensation requirement for February-March 2022 typically gets rolled over to the next year.

Accordingly, a total pay-out of Rs 2.63 lakh crore (Rs 36,700 crore for February-March 2021+Rs 2.26 lakh crore) shall be released by the Union government to the state governments during FY22 for the 12 months from February 2021-January 2022.

According to ICRA, This is sufficient to cover the GST compensation for the period February 2021-January 2022. However, the available funds will not cover the sizeable spill over of Rs 61,000 crore pertaining to the period April 2020-January 2021, the financing options for which remain still unclear.


Knowledge Source:

Government Recovered GST Late Fee of Rs. 6500 Crore During July 2017-Feb 2021

Leave a Reply

Your email address will not be published. Required fields are marked *