States stare at over Rs 1 lakh cr revenue gap post withdrawal of GST compensation


PTI, Jan 5, 2020, 3:53 PM IST

New Delhi: States might be facing a consolidated revenue gap of up to Rs 1.23 lakh crore on account of withdrawal of compensation after the five-year GST transition period ends on June 30, 2022, says a report by economic think tank NIPFP.

At the time of implementation of the Goods and Services Tax (GST) on July 1, 2017, the Centre had promised to compensate states for loss of revenue for five years at an agreed formula.

“If the GST compensation is withdrawn after June 30, 2022, consolidated revenue gap of states would vary between Rs 1,00,700 crore to Rs 1,23,646 crore depending on expected tax buoyancy and reliability of data sources,” the report said.

“This implies that states will need to either generate an equivalent amount of revenue from existing sources to continue with committed expenditures and/or cut down expenditures to cope up with revenue shock in 2022-23,” it added.

Due to the ongoing shortfall in overall GST collection as well as rising revenue gap between GST compensation requirement and GST compensation cess (GSTCC) mobilisation, timely release of GST compensation has become a matter of contention between the union and state governments.

The report said that the withdrawal of GST compensation and fall in overall State Goods and Services Tax (SGST) collection will have a substantial impact on state finances of Punjab, Odisha, Goa, Chhattisgarh and Karnataka, among major states.

Among minor states, substantial revenue gap is expected for Himachal Pradesh, Uttarakhand, Tripura and Meghalaya.

Given the ongoing shortfall in GST collection and uncertainty associated with revenue on account of SGST collection, many states have approached the 15th Finance Commission for a possible extension of the GST compensation period by another three years, i.e. up to 2024-25.

“Any shock to state finances due to withdrawal of GST compensation after the GST transition period may have a profound impact on India’s fiscal management and therefore macroeconomic stability,” the report noted.

It pointed out that even if the GST compensation period is extended beyond June 30, 2022, the Centre may not have adequate fiscal space to provide GST compensation to states at the ongoing annual growth rate of 14 per cent, unless either tax buoyancy and/or nominal growth rate of GDP improves.

To provide GST compensation to states, GST Compensation Cess (GSTCC) was introduced along with GST on some specific items to mobilise resources for the GST Compensation Fund.

The union government manages the fund.

Udayavani is now on Telegram. Click here to join our channel and stay updated with the latest news.

Top News

‘Super 30’: Karnataka to develop one engineering college in each district

China passes new land border law amid military standoff with India

Lakhimpur Kheri: Union minister’s son Ashish Mishra contracts dengue

Extramarital affair: Husband kills wife’s paramour by smashing head with stone

Stray dog problem is a vexing issue for residents of Karkala

Varavara Rao issued non-bailable warrant by Karnataka court in 2005 case

Modi govt has created records in ‘giving trouble’ to people: Priyanka Gandhi on fuel prices

Related Articles More

Govt may raise over Rs 10,000 cr via Bharat Bond ETF by Dec

Mcap of five of top-10 most valued firms down by over Rs 1.42 lakh cr; HUL, RIL most hit

UK says time running out for solution in Brexit trade talks

IPO-bound Nykaa acquires home-grown skincare brand Dot & Key

Rajneesh Karnatak takes charge as ED of Union Bank of India

MUST WATCH

Rescue work at Gudibande, Chikkaballapura

Dwarf Coconut Tree & Hybrid Coconut Varieties

Science and Technology Minister C.N. Ashwath Narayan at Koteshwar

News Bulletin 23-10-2021

Elephant attack at Hunasuru


Latest Additions

Govt gave nod to 157 new medical colleges in India since 2014: Health ministry

Govt may raise over Rs 10,000 cr via Bharat Bond ETF by Dec

Punjab must come back to ‘real issues’ that concern every Punjabi: Navjot Singh Sidhu

Guj: Over 2,000 people get COVID-19 vaccine at home in Ahmedabad

Mcap of five of top-10 most valued firms down by over Rs 1.42 lakh cr; HUL, RIL most hit

Thanks for visiting Udayavani

You seem to have an Ad Blocker on.
To continue reading, please turn it off or whitelist Udayavani.