The States Goods and Services Tax (SGST) collections are expected to contract by 30 per cent to ₹3.5 lakh crore in FY21 from ₹5 lakh crore in FY20, reflecting lower consumption of non-essential items in the aftermath of the Covid-19 pandemic, according to credit rating agency ICRA. With the protected revenues of the States estimated at ₹7.7 lakh crore for FY21 (₹6.7 lakh crore in FY20), the agency anticipates a multi-fold spike in the State governments’ GST compensation requirement to ₹4.1 lakh crore in the current fiscal, from ₹1.7 lakh crore in FY20. Of the State governments’ GST compensation, ₹1.2 lakh crore was released by the Centre to the States during FY20, leaving an unpaid balance of ₹50,500 core as of end-March, the agency said in a report. Jayanta Roy, Group Head – Corporate Sector Rating, ICRA, observed that with the Covid-19 pandemic and associated lockdown expected to shrink non-essential consumption, the finances of the State governments would undergo a dual shock.