12 states seek at least two-year extension for GST compensation

About a dozen states on Wednesday demanded that the compensation to states against their revenue loss due to the implementation of goods and services tax be paid for at least two more years. Under current law, it ends Thursday.

Several states said they would approach Prime Minister Narendra Modi with their demand.

"As many as 16 states spoke on GST compensation in today's meeting. Of this, there were 3-4 states that said that they have to stand on their own and not depend on compensation," finance minister Nirmala Sitharaman told reporters after the meeting of the GST Council here.


GST, which on Thursday completes five years of its roll out, subsumed 17 central and state levies. Under the regime, states were promised compensation for any loss of revenue due to the new tax for five years.

Non-BJP-ruled states, such as Chhattisgarh, Kerala and Rajasthan, want the compensation regime to be extended by five years or the share of states in the GST revenue to be increased to 70-80% from the current 50%.

Union territory Puducherry, where the BJP is part of the ruling alliance, too wanted the compensation mechanism to be extended and expected some positive outcome in the next council meeting in August.

"There were broadly statements being made with a sense of whether compensation can be continued, if not for five years, for a few years," Sitharaman said.

She said the compensation fund so far would be used to pay the back-to-back debt taken during the time of Covid. However, if the collection is in excess, the council will decide how the excess money will be used.

Amendment required
Officials said any extension to the compensation period would require an amendment in the GST law, which is subject to Parliament's approval.

"Extending the compensation is settled so far the GST Council is concerned. If the states want any such extension, the Act will require amendment, which is time-taking and subject to parliamentary approval," an official told ET.