When the assured compensation of five years under the GST system expires in June, the Central government  owes state govts  352.66 billion rupees in goods and service tax compensation, the finance ministry announced on Monday.

As of May 31, the Centre released 869 billion rupees to states as GST compensation, clearing dues for the months of January to May, Minister of State for Finance Pankaj Chowdhury told Lok Sabha in a written reply. Of the outstanding dues, the Centre paid only 250 bln rupees from the available compensation fund, the government had said in a release, adding that it bore the rest of it.

"The balance is being released by the Centre from its own resources pending collection of cess," the ministry had said. When the GST framework was introduced in 2017, the Centre had promised to protect 14% revenue buoyancy for states for five years. The Centre borrowed 1.10 trln rupees in 2020-21 (Apr-Mar) and 1.59 trln rupees in 2021-22 to partly meet the shortfall in GST compensation cess collections. These were passed on to states as back-toback loans. Part of the compensation had been paid to states through loans, as GST cess collections fell sharply following the pandemic. The government has already extended the compensation cess levy under the GST regime till Mar 31, 2026, to service the loans taken.

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