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GST transfers to States are falling short of what was promised
November, 27th 2019

The unprecedented economic slowdown would suggest that the crunch in GST collections is here to stay for a while. Yet the Centre must address the States’ woes at the earliest

With Central GST collections falling short of expectations, States too are feeling the pinch. Under the GST Act, States which experience a tax revenue growth of less than 14 per cent per annum are liable to be compensated by the Centre for the first five years, as part of the transition plan. Under the Act, a compensation cess will be levied on select goods and services, including imports, till July 2022 to raise this sum. However, at least five States have said that the Centre owes ?40,000 crore by way of dues. It is a fact that GST collections are lagging behind the generally accepted monthly benchmark of ?1 lakh crore, including the compensation cess. The unprecedented economic slowdown would suggest that this crunch is here to stay for a while. Yet, to preserve the sanctity of contract, the Centre must address this problem amicably, at the earliest.

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