Government expects Rs 40,000 crore GST shortfall


NEW DELHI: The government is expecting a shortfall of around Rs 40,000 crore in the GST collections over what has been budgeted for 2019-20. This could put pressure on the compensation that states are eligible for in case the tax growth falls below 14% during the year.

A state finance minister said the Centre had informed the GST Council, which met in Goa on Friday, about the expected shortfall at a time when economic growth has slowed down. Most states were, however, optimistic that the government will find a way to meet the compensation requirements, otherwise they may be forced to borrow from the market.

Economic growth has slowed in the country due to a string of factors and latest data showed that GDP growth slumped to a six-year low of 5% in the April-June quarter, hurting prospects for higher revenues.

As part of the GST bargain, the Centre had agreed to compensate states for five years, if the annual increase in revenues was less than 14%. Under the GST law, payment of compensation only flows from a fund where the cess is collected. The Centre has estimated a collection of Rs 1 lakh crore cess on sin and luxury goods in 2019-20 or about Rs 8,000 crore a month. The collection in August was Rs 7,272 crore, triggering possibility of a lower than budgeted collection. In the first four months of the year, the Centre has released Rs 45,784 crore as compensation to states. The states are also demanding that the compensation period be extended by another three years. The government has said it expects revenues to rebound when growth picks up in the coming quarters and is also hopeful of robust GST collection.

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It is taking measures to plug loopholes and stamp out fraud claims.

The GST Council, which met after the historic cut in corporate tax rates, complimented the finance minister Nirmala Sitharaman on the bold move but state FMs are learnt to have expressed their concern over decline in their share.





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