The Union Finance Ministry on Friday clarified that the Central government does not retain any GST that is due to any State government. There is no amount pending to be given to any State due to Integrated Goods and Services Tax (IGST), it said in response to The Hindu’s report ‘State (Tamil Nadu) recovers over ₹1,500 crore of IGST revenue’ published on June 14.
The Ministry said the Centre had not retained in its kitty ₹3,046 crore to be paid to Tamil Nadu on account of IGST. Amount due to States are paid through a monthly IGST Settlement Process for the 50% share of IGST on inter-State supplies to the States. The share is distributed based on actual consumption. This is clearly delineated in the GST Rules, it added.
For instance, buyers claiming Input Tax Credit (ITC) for IGST in their returns identify the beneficiary State. Once the ITC is utilised, the State’s portion is settled. Sometimes, ITC may not be utilised for reasons, such as the supply of exempt or non-GST goods; the blocked ITC as per law; or a lapsed time period. In these scenarios, the beneficiary State cannot be determined, leading to a surplus in the IGST head.
“However, this is not a surplus held by the Centre. The surplus is distributed to all States proportionally on an ad-hoc basis,” the Ministry said adding the Centre has thus distributed ₹1,67,000 crore. Some States encourage businesses to utilise the ITC for a more accurate and timely distribution through regular settlements, the Ministry said.
Recent trends show an IGST shortfall rather than a surplus, it noted. In the Financial Year 2023-24, the negative balance in the IGST account was ₹5,516 crore. In the first two months of FY 2024-25, the negative balance is ₹10,304 crore. Thus, the Centre has distributed more tax revenue to the States than has been collected, it said.
