Central Government Finally Helps States with Pending GST

Due to the Lockdown and COVID-19 Pandemic state governments are having a tough time to collect revenue, and by observing that the Central government had earlier released GST Compensation of INR 1,15,096 crore for the period of April to November 2019 and today additional INR 36,400 crore GST Compensation has been also released. Today, GST Compensation of Rs.36,400 crore to the States/UTs has been released by the Central Government for the period from December 2019 to February 2020.

As per the Goods and Services Tax (Compensation to States) Act, 2017 allow levying Compensation cess to provide compensation to the States for the losses in revenue collection which are occurring after implementation of the goods and services tax. The state government will get compensation for a period of five years from the date when the Central Goods and Services Tax Act Get the brief introduction of SGST, IGST and CGST. We have mentioned their full forms, meanings and adjustments of input tax credit under GST in India is brought into force which was July 2017.

Meanwhile, the growth rate for revenue collection was estimated at 14 percent a year for States during the 5–year period. And as per the act, the compensation needs to be paid bi-monthly and the last part for any assessment year will be given in the next year.

Here compensation cess stands for a cess that can be collected on the supply of selected goods and/or services or both till July 1, 2022. The cess will collect compensation amounts for the states for any loss in revenue collection after the implementation of Good and Service Tax. It is different than other mechanisms, the cess is neither payable by exporters nor by those who have opted for compensation levy and the input tax credit of it can only be used while paying compensation cess and not in case of any other taxes like IGST, CGST, or even SGST.