The Ministry of Finance has informed that the Government of India has released the entire amount of GST compensation payable to States up to 31st May, 2022 by releasing an amount of Rs 86,912 crore.
This decision was taken to assist the States in managing their resources and ensuring that their programmes especially the expenditure on capital is carried out successfully during the financial year. This decision has been taken despite the fact that only about Rs 25,000 crore is available in the GST Compensation Fund. The balance is being released by the Centre from its own resources pending collection of Cess.
In order to meet the resource gap of the States due to short release of compensation, Centre had borrowed and released Rs.1.1 lakh crore in 2020-21 and Rs.1.59 lakh crore in 2021-22 as back-to-back loan to meet a part of the shortfall in cess collection. All the States have agreed to the above decision. In addition, Centre has also been releasing regular GST compensation from the Fund to meet the shortfall.
However, it is expected that the Ministry of Finance may offer a special package to states keeping in view their financial distress, as many states have demanded extension of period of GST compensation by five years beyond 2022.