The central government has released Rs 36,400 crore in compensation to states for the monthly losses they incurred due to the implementation of goods and services tax.
The payout is for the December-February period, the Ministry of Finance said in a statement. The central government compensates states bi-monthly as they lost powers to levy taxes after the rollout of goods and services tax. The compensation is guaranteed for five years, and is calculated at an annual growth rate of 14% keeping 2015-16 as the base year.
The statement didn't specify whether the amount released is partial or full payment of the compensation for the three-month period. As collections from compensation cess—levied on sin or demerit goods—started falling short, the central government delayed the payouts and released the amount in tranches.
In May, it transferred Rs 15,340 crore to states for October-November as its third installment for the two-month period—the first and the second being Rs 19,950 crore and Rs 14,103 crore, respectively.
For April-November 2019, it released Rs 1,15,096 crore as compensation to states against Rs 95,551 crore collected in the entire 2019-20 fiscal.
The monthly requirement of compensation to states doubled since August 2019 as GST collections started declining. The average monthly GST compensation cess due is around Rs 14,000 crore compared with Rs 6,000 crore in 2018-19, a government official told BloombergQuint on the condition of anonymity. The average monthly cess collection is Rs 7,000-Rs 8,000 crore, the official said.
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