GST compensation dues for 9 states could double to Rs 70,000 crore: ICRA

Ratings agency ICRA expects just nine states to need Rs 70,000 crore as compensation for the shortfall in goods and services tax (GST) collection in FY20, on account of a severe dip in growth of state GST (SGST) revenues amid the slowdown.

Karnataka, Kerala, Tamil Nadu, Gujarat, Maharashtra, Haryana, Punjab, Rajasthan, and West Bengal are the nine states. The requirement for all states could be much higher.

Till now, three tranches of compensation to all states for the April-September period (H1FY20) have cost the Centre nearly Rs 80,000 crore. Business Standard reported on Thursday that for the entire fiscal year, the Centre would face shortage in compensation cess to the tune of Rs 63,000 crore.

However, there is a silver lining for the Centre — it would need to give states Rs 60,000-70,000 crore less as devolution this year, given that it disbursed an excess amount in FY19. The excess devolution was on account of the revised estimate, which was higher than the provisional actual revenue for FY19. On the actual level, the requirement for devolution would have been lower, and the Centre will recover the excess amount paid last year by adjusting the same in this year’s payment.

This may balance out the loss arising from the excess payment to states for the SGST shortfall. States’ problems, related to finances, are therefore far from over.