Centre owes GST compensation of Rs 2,433 crore to Telangana

The union government is not only denying funds and delaying payments, but also not clearing the GST dues to Telangana.

Notwithstanding tall claims of the Union Ministers, the Centre owes GST compensation of Rs 2,433 crore for the last three years to Telangana. Since the commencement of GST regime, Telangana received Rs 16,570 crore towards GST compensation which is lowest among all the major States in the country.

The Centre is yet to clear GST compensation dues amounting to Rs 1,371 crore for the financial years of 2020-21 and 2021-22, as well as another Rs 1,061 crore for 2022-23.

Despite repeated requests from the State to clear the dues, there has been no concrete response from the Centre till date. As a result, the State government is now planning to explore legal options including approaching the courts.

The Goods and Services Tax (GST) was introduced on July 1, 2017 and June 30, 2022 marked the end of the transition period during which the States were compensated for any loss in revenue due to the implementation of the new tax regime, calculated as the difference between the projected revenue based on a 14% annual growth with 2015-16 as the base year and the actual GST revenue.

The compensation to the States was being met through the levy of a GST compensation cess on specified goods and services. According to a recent report by Reserve Bank of India, the top five highest compensation



receiving States are Maharashtra, Karnataka, Gujarat, Tamil Nadu and Punjab.

“It implies that all these States which happen to be largest revenue earning States, could not achieve 14 per cent annual growth in the projected revenue as against actual GST revenue. Telangana is one of the fastest-growing states in India posing average annual growth rate of 13.9 percent over the last five years. Thus, Telangana is being penalised for performing better than others,” an official in the Finance department told.

Meanwhile, the revenue from the GST compensation cess collected by the Centre has shot up against the amount disbursed to the State. Rather than compensating from its existing revenue collections, the union government imposed additional burden on citizens under the guise of GST compensation cess.

While the collections from GST Compensation cess increased from Rs 62,600 crore in 2017-18 to Rs 1.2 lakh crore in 2022-23, the disbursement to the States went up from Rs 49,600 crore in 2017-18 to highest Rs 1.68 lakh crore in 2020-21 during Covid-19 pandemic and has come down to Rs 18,000 crore in 2022-23.

Despite repeated requests from the States including Telangana to extend the GST compensation period for another five years, the union government discontinued it. However, it has decided to continue collection of GST compensation cess from tax payers for another five years.