Indian Finance Minister Doles Out $2.73 Bn Bonanza for States Amid Covid

The central government has paid compensation to states since it subsumed a large number of their taxes in the indirect tax system (GST), which was introduced in 2017. But this year, the Indian government is unable to pay the $12.93 billion compensation to the states due to the Covid-19 pandemic.

In a move designed to provide financial relief during the Covid-19 pandemic, the federal tax body under Finance Minister Nirmala Sitharaman's is to pay state governments compensation of $2.73 billion.

Addressing a press conference after a marathon meeting of the Goods and Service Tax (GST) Council, Sitharaman said: "Whatever has been collected in the form of compensation will be distributed to the states tonight. State governments will be paid $2.73 billion.”

The council also discussed the issue of state governments raising debt to meet the compensation gap.

Since the central government has not paid the requisite compensation to the states since April, due to Covid, it has now offered them help in raising debt to meet the gap. No final decision has yet been taken on the debt issue.