An ICRA report analysed the trends for 15 state governments that have been the largest recipients of GST compensation in recent quarters. In absolute terms, Maharashtra recorded the highest provisional GST compensation requirement for April-July at Rs 22,500 crore
The Centre has pegged the provisional Goods & Services Tax compensation due to 28 state governments and three Union Territories (UTs) for April-July at Rs 1.51 lakh crore, as per data available on the Lok Sabha website.
The GST compensation requirement for the April-July period is equivalent to nearly 92 percent of FY20’s compensation of Rs 1.65 lakh crore.
“This is as much as half of the Centre’s assessment of Rs 3 lakh crore GST compensation requirement of states for FY21, implying that the requirement for the balance eight months of FY21 would be restricted to Rs 1.49 lakh crore,” a report by credit rating agency ICRA said.
The report analysed the trends for 15 state governments that have been the largest recipients of compensation in recent quarters. In absolute terms, Maharashtra recorded the highest provisional GST compensation requirement for April-July at Rs 22,500 crore, followed by Karnataka (Rs 13,800 crore), Uttar Pradesh (Rs 11,700 crore), Gujarat (Rs 11,600 crore) and Tamil Nadu (Rs 11,300 crore).
The total provisional compensation requirement of West Bengal, Kerala, Punjab, Rajasthan, Madhya Pradesh and Haryana is between Rs 55,000 crore and Rs 80,000 crore for April-July, while that of Telangana, Andhra Pradesh, Bihar and Odisha is lower at Rs 36,000-55,000 crore.
“Worryingly, the GST compensation requirement for April-July for five out of these 15 states, namely Telangana (177.6 percent), Andhra Pradesh (152.8 percent), Uttar Pradesh (128.7 percent), West Bengal (125 percent) and Maharashtra (116.9 percent) exceeds their respective GST compensation for the entire previous fiscal,” the report said.
The provisional GST compensation requirement of Rajasthan (94.1 percent), Tamil Nadu (91.6 percent), Madhya Pradesh (89.7 percent), Haryana (88.3 percent), Kerala (87.3 percent) and Bihar (82.2 percent) for April-July is equivalent to a sizable 80-95 percent of their respective GST compensation for FY20, it added.
“With the GST compensation for April-July yet to be released, some of the states with a high compensation requirement for these months have had to resort to a sharp increase in their state development loan (SDL) issuance,” ICRA said.
The gross SDL issuance of all states and two UTs stood at Rs 3.12 lakh crore between April and September 15, an increase of Rs 1.07 lakh crore from the same period in 2019.
“This incremental SDL issuance of Rs 1.07 lakh crore by all states is equivalent to a large chunk of the unreleased GST compensation requirement for the first four months of FY21 of Rs 1.51 lakh crore,” the report said.
After the state governments decide on one of the two borrowing options for bridging the gap between the GST compensation requirement and cess collections, SDL supply could rise appreciably in the coming months, the report said.”However, it is unclear if all state governments are likely to submit their final borrowing choice to the Centre before the indicative borrowing calendar of state governments for Q3 FY21 is finalised and announced by RBI by September-end,” ICRA said.
Source: Moneycontrol.com
***
[rainbow]Don’t miss the next GST Update / Article / Judicial pronouncement[/rainbow]
Subscribe to our newsletter from FREE to stay updated on GST Law
Resolve your GST queries from national level experts on GST free of cost.
TW Editorial Team comprises of team of experienced Chartered Accountants and Advocates devoted to spread the knowledge of GST amongst the various stakeholders.
