GST compensation package is sufficient for FY22 by Icra

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The cess collections,consecutive market loans and other some funds placed in the GST Compensation Fund will be sufficient to touch the  Rs 2.63 lakh crore wanted in FY22 to make up the states for shortfall, but it will not be sufficient to pay Rs 61,000-crore arrears for April-January of FY21 said by the rating agency Investment Information and Credit Rating Agency (Icra).

They estimate the combined protected incomes of all the states at Rs 8.72 lakh crore and the state GST (SGST) collections at Rs 6 lakh crore for FY 2021. Appropriately, the ICRA estimates the GST compensation needs for FY22 (April-March) at Rs 2.7 lakh crore. From this, the proportionate compensation for the period April 2021-January 2022 is fixed at Rs 2.26 lakh crore, which is anticipated to be given to the state governments in FY22 itself. The balance Rs 45,200 crore for February-March 2022 is being rotated over to FY23. 

The compensation needed for February-March of a fiscal year typically gets rotated over to the next year. According to ICRA, the total payout of Rs 2.63 lakh crore (Rs 36,700 crore for February-March 2021 plus Rs 2.26 lakh crore) is to be delivered by the Union  to  state governments during FY22 for the 12 months from February 2021-January 2022.

The opening balance of GST Compensation fund is about Rs 4,700 crore, the planned cess collection of Rs 1 lakh crore for FY22 and the  market borrowing of Rs 1.58 lakh crore, declared shortly by the Union government, would give Rs 2.63 lakh crore to the Centre to reveal as GST compensation to the state governments in the current fiscal. And according to ICRA, this is enough to meet the GST compensation for the period February 2021-January 2022. But the available funds will not meet the considerable spillover of Rs 61,000 crore concerning the period April 2020-January 2021, the financing alternatives for which remain doubtely.

The rating agency ICRA estimated the total sum of compensation  to the period April 2020-January 2021 at Rs 2.41 lakh crore, against which the Union government has announced Rs 1.8 lakh crore to the state governments in FY21 through consecutive loans and the inflows of GST compensation cess. Appropriately, it estimates that a compensation of Rs 61,000 crore concerning the period April 2020-January 2021, is uncertain. Besides, the compensation for February-March 2021 is calculated by ICRA at Rs 36,700 crore, which is expected to be declared in FY22.

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