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Balancing act: GST aid to states may continue till FY 25


The state governments’ GST revenue shortfall may continue to be compensated till FY25, that is, for three more years after FY22, the final year prescribed under the law. However, for the post-FY22 period, the ‘shortfall’ would be estimated taking into account the fact that GST revenue buoyancy has been lower than expected. This means the annual growth rate to be assured for states will be lower than the current 14%, for the post-FY22 period.

This view seems to have emerged in the 15th Finance Commission which analysed the pros and cons of the compensation mechanism, including the “moral hazard” of ...


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