Through the enactment of the GST (Compensation to the
States) Act, 2017, the states have been assured a
revenue growth of 14% in GST with reference to the
revenue collections made in the year 2015-16 and any
shortfall thereon will be met using GST compensation
cess collected by the Centre.
It may be pointed out that for FY 2020-21, the states
were informed that the cess collections in the
compensation cess fund were expected to be adversely
impacted due to the economic impact of Covid-19.
Accordingly, the states were given two borrowing options
in lieu of GST compensation for FY 2020-2021.
As per option-1, Tamil Nadu had received a loan amount
of Rs 6, 241 crore and grant amount of Rs 5,161 crore
during FY21. The Centre has released previous year
arrears of Rs 7,235.8 crore in FY22, including a Rs
539-crore arrear amount for 2018-19, the chief minister
On the issue of sharing proceeds of cess and surcharge
with the states, the Tamil Nadu government has pointed
out that the levy of cesses and surcharges must be
reversed immediately, and all such cesses and surcharges
must be merged with the basic rate of tax so that the
states receive their legitimate share of the revenue.
It is the serious concern of the state that the size of
the divisible pool of taxes is steadily shrinking as the
government of India is increasingly resorting to levy of
cesses and surcharges which are not shareable with the
The 14th Finance Commission in its report has observed
that the cesses are meant to be fully utilised for the
purposes for which they are levied. The Comptroller and
Auditor General of India has also drawn the attention to
the lack of transparency and incomplete reporting in
accounts on the utilisation of amounts collected under
cesses. Similarly, surcharges are meant to be levied
only for short periods and pointed out the states
concern on the levy of cesses and surcharges.