Release of fund to state to clear GST compensation dues: Finance Ministry
Recently, the central government has cleared the entire Goods and Services Tax (GST) reimbursement dues till date.
This decision has been taken to assist the states in managing their resources. In addition, the receipt of arrears would enable the state governments to successfully conduct their programmes, especially capital expenditure, during the financial year.
GST was implemented on July 1, 2017. It is a destination based tax, which is applicable on the consumption of goods and services in the country.
Destination-based tax results in loss of revenue for manufacturing-activities states.
Therefore, the states were assured of compensation for a period of five years against any loss of revenue due to the implementation of GST.
For this, provisions have been made in the Goods and Services Tax (Compensation to States) Act, 2017.
It is paid on bi-monthly basis.
GST Reimbursement Cess is collected on the supply of select goods or services or both.
These include luxury, demerit and sin goods, such as pan masala, various tobacco products, etc.
The amount of Cess collected is being deposited in the Reimbursement Fund. Compensation to the states is being paid from the reimbursement fund with effect from July 1, 2017.
Recently, several states have demanded extension of the GST Compensation Cess regime for another five years. He has made this demand citing low GST collection and increase in expenses due to the pandemic.
Source – The Hindu
