States May Get ₹20K Cr as FY20 GST Compensation

The Centre is likely to pay only 200 Billion rupees more in 2019-20 (Apr-Mar) to states as compensation for revenue losses on account of the goods and services tax, a senior finance ministry official said.

The government has exhausted the initial Budget estimate of Rs 1.01 lakh crore for compensation and the revised estimate has given an additional Rs 20000 crore of funds, the official said.

The Budget for 2020-21 had revised the expenditure for compensation to states to 1.21 trln rupees from 1.01 trln rupees.

"The only way we can exceed (revised estimate for payment of compensation to states) is if supplementary is given," official said.

States have been complaining about the delay in the payment of GST compensation by the Centre. The government had promised compensation to states for the first five years of GST to ensure revenue buoyancy of at least 14% to states.

"We have not paid compensation to states after September because the cess fund did not have enough money," the official said.

The Centre will compensate states only if there is money in the compensation cess fund, since the law says the compensation has to be paid out of the fund, the official said.