The Press Information Bureau recently issued a press release to highlight a response the Minister of State for Finance Pankaj Chaudhary gave in the Lok Sabha on GST compensation due to the states. "The Government has paid all the Goods & Services Tax (GST) Compensation dues to the states for financial years 2020-21 and 2021-22. This was stated by Minister of State for Finance Pankaj Chaudhary in a written reply to a question in the Lok Sabha today," read the first two lines of the press release dated July 19, 2021.
Before we check, if this is true or not, let's understand what is GST compensation and how it is computed.
What are GST Dues?
GST compensation dues are released every two months to states which face a shortfall in revenue arising from the difference in GST collections of the state and the budgeted estimates of a state's revenue for that period. These budgeted estimates of revenue for the states arise from the provisions in the Goods and Service Tax (Compensation) Act, 2017. Under this, "states are assured of their revenue at 14% compounded growth rate over the base year revenue 2015-16 for loss of revenue arising on account of GST implementation for a period of five years," said Anurag Singh Thakur, former Minister of State for Finance, in the Lok Sabha in September 2021.
This bi-monthly compensation to states comes from the 'GST Compensation Fund', FactChecker explained earlier this week in an article on why five north-eastern states have no GST dues.
Chaudhary's response in the Lok Sabha does not mention the claim PIB's press release carries. In fact, he has given a state-wise list of provisional GST compensation dues that are "yet to be released" to the states for 2020-2021 and April-May 2021, which totals to Rs 1.36 lakh crore. This includes Rs 81,179 crore in the last financial year and Rs 55,345 crore for April-May 2021.
The Centre borrowed Rs 1.1 lakh crore as back-to-back loans for states to fill the compensation gap during the last financial year. Similarly, this year, it's borrowing Rs 1.59 lakh crore. Of this, it released Rs 75,000 crore to the states on July 15, 2021.
"Subsequent to deliberations in the 43rd GST Council meeting, it has been decided that the Centre is borrowing Rs. 1.59 lakh crore from the market through special window in current FY and passing it on to the States/ UTs as a back-to-back loan in appropriate tranches as was done last year. As per this decision, Rs 75,000 crore has been released to States/ UTs on 15.07.2021," read the LS response.
The amount transferred to states is almost 50% of the total shortfall for the year, the Ministry of Finance had said on July 15.
While Chaudhry's response on July 19, 2021 made no statement on paying off GST dues to states for 2020-21 and 2021-22, it did mention that the Centre had released the amount for three years before that. "GST compensation for financial years 2017-18, 2018-19 and 2019-20 has already been paid to the states," read Chaudhary's answer.
To seek further clarification on the PIB press release, FactChecker contacted Kush Mohan Nahar, Media & Communications Officer at Press Information Bureau and handles media and communication duties of the Union Ministry of Finance. Nahar denied the fact that the press release was different than the response given in the Lok Sabha.
"This press release is as per the minister's reply in the Lok Sabha. Answers to questions asked in Parliament are prepared in advance. You will get the clarification required once you go through previous press releases," said Nahar.
So, we did. A press release dated July 15, 2021, that elaborated on the distribution of the Rs 75,000 crore to states/UTs, also mentioned that there exists a balance amount after this payment. "For assisting states/UTs in their endeavour, Ministry of Finance has frontloaded the release of assistance under the back-to-back loan facility during FY 2021-22 ₹75,000 crore released today in a single instalment. The balance amount will be released in the second half of 2021-22 in steady instalments," read the press release.
If we go even further back, in March 2021, Former Minister of State for Finance Anurag Thakur had said that owing to the pandemic, the Centre hasn't been able to meet the compensation due to the states.
"In the wake of COVID-19 pandemic the GST collection as well GST compensation cess collection declined sharply in 2020-21, due to which GST compensation requirement to all States/UTs increased. Such increase in the GST compensation requirement of States/ UTs for 2020-21 could not be met from the GST Compensation Fund due to inadequate amount in GST Compensation Fund," said Thakur in the Lok Sabha on March 15, 2021.