Recently the central government made an amendment into the legislation on the compensation cess under GST which made the centre very rightful in claiming a stake in “the unutilised (amount) in the Fund at any point of time in any financial year during the transition period”.
The compensation cess which is now approximately Rs 1.28 lakh crore since the introduction of goods and services tax was designated for the states having any financial loss due to the implementation of goods and services tax.
While the centre also said that the states would be getting 14 per cent of annual growth from the implementation of GST and would be paying compensation in case if the states failed to achieve the target.
If one talks about the original use of compensation cess, it was settled that, “at the end of the transition period shall be transferred to the Consolidated Fund of India as the share of the Centre and the balance 50 per cent shall be distributed among the states in the ratio of their total revenues from the State tax or the Union territory Goods and Service tax as the case may be, in the last year of the transition period.”
But now everything is clear according to the amendment which clearly states that the centre can now claim the unused amount at any point of the financial year.
Although the fund utilization is the matter of GST council and the collective approach of the states and any use of the compensation cess will call upon authorities for the decision.
