Centre to clear all GST compensation dues to states, says FM Nirmala Sitharaman

The central government has decided to clear all pending dues of GST compensation amounting to Rs 16,982 crore to states even though the money has not yet been collected, Union Finance Minister Nirmala Sitharaman said on Saturday.

Karnataka will receive Rs 1,934 crore, which is the second highest amount of the compensation to be paid to 23 states. The highest amount of Rs 2,102 crore will go to Maharashtra.

Addressing a media conference after the 49th GST Council meeting, Sitharaman said GST compensation cess till May 31, 2022 has already been cleared and the amount due is for the month of June 2022.

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As per the GST (Compensation to States) Act, 2017, the centre has to pay GST compensation cess to states for 5 years from the date of implementation of the indirect tax regime. The 5 year period ended on June 30, 2022.

“Although this amount is not really available in the compensation fund as of today, we have decided to release this amount from our own resources,” the finance minister said.

In addition, the central government has also decided to clear the admissible final GST compensation to those states who have provided the revenue figures as certified by the Accountant General (AG) of the states. This compensation amounts to Rs 16,524 crore. Six states, including Tamil Nadu, Telangana and Delhi, that have submitted AG certificates, will receive this amount.

Meanwhile, the GST Council has decided to reduce taxes on liquid jaggery and pencil sharpeners. On liquid jaggery or rab gur, GST rate has been cut from 18% to 5% if sold pre-packaged and labelled and to nil if sold loose.

GST has been cut from 18% to 12% on pencil sharpeners. GST on tags tracking devices or data loggers which are affixed on durable containers, has been cut from 18% to nil.

The council has also accepted the recommendations of two groups of ministers (GoMs) – one related to the establishment of appellate tribunal and the other related to taxation of pan masala and gutkha industry.

Capacity-based taxation mechanism will be implemented on businesses of commodities like pan masala, gutkha and chewing tobacco.

On establishment of the GST appellate tribunal, Sitharaman said the council has accepted the GoM’s recommendation with slight modifications in the language. It will be shared with states on Sunday, following which a final draft of the tribunal’s setting up will be worked out, the minister said.

The group of ministers (GoM) related to setting up appellate tribunal was chaired by Haryana deputy chief minister Dushyant Chautala.

The council also recommended rationalisation of late fee for delayed filing of annual GST returns.