RBI Study on GST Compensation receiving States

January 30, 2023

The Reserve Bank of India recently released its study of state finances. The report details the financial positions of the states and also presents an analysis of states receiving GST Compensation. Tamil Nadu is one of the five states in the country to receive GST compensation. The other states are Karnataka, Maharashtra Gujarat, and Uttarakhand.

Key Findings

When the GST compensation ends, the most affected states and UTs will be Punjab, Delhi, Puducherry, Himachal Pradesh, Goa, and Uttarakhand
Of all the states, the northeastern states gained the maximum benefits of GST compensation

Recommendations

The states that are to be affected by the end of GST compensation should increase their compliance and widen their tax bases. The Union Government provided complete compensation during the first five years of the GST launch. Compensation was presented based on revenue growth. The annual growth of the revenue received from the GST increased to 14% in 2023 with 2015-16 as the base year

Revenue Growth from GST

The revenue growth will be affected in the future as the world economy is to slow down in the coming future. GST compensation cess collected was 1.2 trillion rupees in 2023. It was 1.04 trillion rupees in 2021 – 22.

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