Published Paper Details:

The elimination of GST (Goods and Services Tax) compensation has substantial ramifications for Indian state income. This article evaluates the impact of compensation withdrawal on state budgets using data from 2017-18 through 2020-21. The findings show that many states heavily depend on GST compensation to bridge the income gap, and that removing compensation will result in revenue deficits, fiscal imbalances, and developmental setbacks. Furthermore, the withholding of compensation contradicts cooperative federalism and may result in a slowing of economic progress. To address the possible negative consequences, mitigation measures such as finding other income sources, improving tax administration, and rationalising spending are required. In the absence of GST compensation, collaborative efforts between the central government and states, as well as wise financial management, are critical to ensuring a balanced and thriving economic environment.