The much-delayed compensation comes at a time when state finances are under severe stress due to the Covid-19 lockdown.
Taking stock of the current situation due to COVID-19 where State Governments need to undertake expenditure while their resources are adversely hit, the Central Government has released the GST Compensation of Rs.36,400 crore to the States/UTs with Legislature for the period from December, 2019 to February, 2020 today.
The GST Compensation of Rs.1,15,096 crore for period April-November, 2019 had already been released by the Central Government to the States/ UTs with Legislature. Since the end of August 2019, the Centre has been in a precarious position while paying GST compensation to the States and UTs with legislative assemblies. On an average, the monthly GST compensation cess requirement was to the tune of ₹14,000 crore while the cess collection on an average was only ₹7,000-₹8,000 crore per month. Therefore, the only options left for the GST Council are to either bring more items under the cess base or to increase cess rate on the existing items.
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Meanwhile, as business activities came to a virtual standstill in April, owing to the COVID-19 led lockdown, GST collections for the month took a dip. GST collections for April reportedly stood around Rs 43,000 crore,reported by moneycontrol.