GST Compensation Stopped After 2022 as Per Constitutional Limit; Why GST Compensation Cannot Continue Beyond the Five-Year Period; No Additional GST Support to States After June 2022: Legal Mandate Explained; GST Compensation Timeline Ends: What the Law Actually Provides; GST Payout to States Ends Legally; No Scope for New

GST Compensation Stopped After 2022 as Per Constitutional Limit; Why GST Compensation Cannot Continue Beyond the Five-Year Period; No Additional GST Support to States After June 2022: Legal Mandate Explained; GST Compensation Timeline Ends: What the Law Actually Provides; GST Payout to States Ends Legally; No Scope for New Compensation

The Government clarified in Lok Sabha that GST compensation to States was discontinued after June 2022 strictly in accordance with constitutional provisions. Under Section 18 of the Constitution (101st Amendment) Act, 2016, States were assured compensation for revenue loss arising from the implementation of GST for only five years. To implement this mandate, Parliament enacted the GST (Compensation to States) Act, 2017, which provided compensation up to June 2022 and not beyond. Since the compensation period ended as per law, the Government stated that questions regarding revenue loss for individual States, including Tamil Nadu, and possible compensatory measures do not arise. The reply reiterates that the discontinuation is not a policy withdrawal but a constitutional timeline that has already concluded. The response emphasises that no extension was mandated and therefore no additional compensation is under consideration.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE

LOK SABHA UNSTARRED QUESTION NO. 59

TO BE ANSWERED ON MONDAY, THE 01st DECEMBER, 2025/ 10 AGRAHAYANA, 1947 (SAKA)

Discontinuation of GST Compensation

59 SHRI THIRU ARUN NEHRU:

Will the Minister of FINANCE be pleased to state:

a. the details regarding discontinuation of Goods and Services Tax (GST) compensation to States by the Government after June 2022;

b. the reasons cited by the Government for discontinuing GST compensation beyond the said period;

c. the estimated annual revenue loss incurred by the State of Tamil Nadu as a result of discontinuation of GST compensation; and

d. the steps being considered or proposed by the Government to compensate the State for this loss and the details thereof?

ANSWER

THE MINISTER OF STATE IN MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)

(a) & (b):- As per section 18 of the Constitution (One Hundred and First Amendment) Act, 2016, Parliament shall, by law, on the recommendation of the Goods and Services Tax Council, provide for compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax (GST) for a period of five years. Accordingly, GST (Compensation to States) Act, 2017 was enacted by Parliament. GST compensation was provided to States/UTs for five years (i.e.) upto June 2022 as per Constitutional provisions.

(c) & (d):- Does not arise in view of response in (a) and (b) above.