The shortfall is calculated assuming a 14 per cent annual progress in GST collections by states over the bottom yr of 2015-16. The 5-year interval ends in June 2022.
The compensation quantity to be paid from the compensation fund is arrived at by levying cess on high of the best tax slab on luxurious, demerit and sin items.
In a written reply within the Lok Sabha, Sitharaman mentioned the central authorities is dedicated to giving GST compensation to states/UTs for five years as per the Constitutional provision.
To a question whether or not the federal government has obtained proposals from state governments requesting extension of compensation mechanism for one more 5 years in view of difficulties attributable to the pandemic, she mentioned “Sure Sir. Many states have requested for extension of the compensation interval through the deliberations in GST Council and in letters addressed to the central authorities”.
GST compensation for monetary years 2017-18, 2018-19 and 2019-20 has already been paid to states.
Since collections within the compensation fund are falling in need of requirement, for 2020-21 and 2021-22, the Centre has borrowed funds value Rs 1.10 lakh crore and Rs 1.59 lakh crore, respectively and handed it on to states as back-to-back loans.
The compensation cess, levied on luxurious and demerit items, will proceed to be collected until March 2026 to repay the borrowings that had been accomplished in 2020-21 and 2021-22 to compensate states for GST income loss.