GST Compensation: Centre clears dues for all states except two; New mechanism under review

The Centre has released all provisionally admissible GST compensation dues to states and union territories for the five-year transition period between July 1, 2017, and June 30, 2022, the Finance Ministry said in a written reply to Parliament on Tuesday (July 22).

According to the ministry, final compensation, based on audited revenue figures, is pending only for Arunachal Pradesh and Manipur, as the Accountant General (AG) certificates from these states are still awaited. No other state's dues are pending, it clarified.

To manage the post-compensation era, the GST Council, in its 54th meeting held on September 9, 2024, recommended the formation of a Group of Ministers (GoM) under the chairmanship of the Union Minister of State for Finance. The GoM will propose alternatives to the now-abolished compensation cess, which officially ended after the mandated five-year period.

In a separate reply, the Ministry of Finance on Monday ruled out any immediate reduction in Goods and Services Tax (GST) rates to provide relief to consumers, stating that the matter is under the jurisdiction of the GST Council and a key report on rate rationalisation is still pending.

Responding to an unstarred question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary clarified that GST rates are set based on the recommendations of the GST Council, a constitutional body that includes representatives from the Centre and States/UTs. He noted that during its 45th meeting on September 17, 2021, the Council had formed a Group of Ministers (GoM) to examine GST rate rationalisation, but this group has yet to submit its report.

Without the GoM’s final recommendations, questions regarding proposed rate cuts or their timelines, the Minister said, “do not arise.”