The union government is not only withholding funds and delaying payments, but it is also failing to clear the GST dues to Telangana.
Despite the tall claims of Union Ministers, the Centre owes Telangana Rs 2,433 crore in GST compensation for the last three years. Telangana has received Rs 16,570 crore in GST compensation since the start of the GST regime, the least of any major state in the country.
The Centre has yet to clear GST compensation dues totaling Rs 1,371 crore for financial years 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, the Centre has yet to provide a concrete response. As a result, the State government intends to look into legal options, including approaching the courts.
The Goods and Services Tax (GST) was implemented on July 1, 2017, and the transition period ended on June 30, 2022, when the states were compensated for any revenue loss 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 states were compensated through the levy of a GST compensation cess on certain goods and services. According to a recent Reserve Bank of India report, the top five states in terms of the highest compensation received 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 was quoted as saying.
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In the meantime, 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 an additional burden on citizens under the guise of GST compensation cess.
While the collections from the 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 states such as Telangana to extend the GST compensation period for another five years, the union government ended it. It has decided, however, to continue collecting GST compensation cess from taxpayers for another five years.
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