Despite the series of rate cuts since its July 2017 launch, the shortfalls in GST collections seem to be bridging for many states, in what indicates an improvement in compliance. As a result, the overall GST revenue deficit for states has come down to 10% in April-November 2018 from 20% in the August 2017-March 2018 period, data gathered by FE showed. (The deficit is reckoned against the 14% y-o-y growth target set under the GST compensation law).
Among the big states that managed to reduce the shortfall the most are Bihar (18 percentage point reduction between the two periods), Assam (14 pps) and Jharkhand (10 pps). The deficit saw a marginal rise or remained at the same level in case of Tamil Nadu, Karnataka, Gujarat and Kerala. Also, in case of some states like Himachal Pradesh, Punjab, Uttarakhand and Jammu and Kashmir, the shortfall is still very high at over 30%.
The states are, of course, guaranteed full compensation for any revenue shortfall against the 14% target.
Notwithstanding the compensation, the states also bear the brunt of GST revenue shortfall, as it would affect the Centre’s tax devolution to them under the Finance Commission formula.
Finance minister Arun Jaitley has recently stated that only six states have achieved the revenue-growth target, while seven were very near to achieving it.
The overall monthly GST target for states last fiscal was Rs 43,000 crore if one goes by the 14% growth norm (it is another matter states individually set higher targets). That means they would need a little over Rs 49,000 crore/month in the current fiscal.
The latest trends in revenue indicate that some of the ‘consuming states’ that were running high deficit last fiscal have managed to reduce the gap significantly. These include Bihar, Assam, Rajasthan, Madhya Pradesh and Jharkhand. In contrast, “manufacturing states” like Maharashtra and Gujarat are still struggling.
Arguing that GST revenue position isn’t disappointing as it is made out to be, Jaitley said recently that the targets set for the states were ‘unprecedently high’ and so, ‘almost unachievable’.
Recalling that tax incidence on some 235 items were 31% or higher during the UPA regime, Jaitley said substantial rate reductions — in monetary terms amounting to about Rs 80,000 crore/year — have already taken place from that levels in the UPA period.”
“Notwithstanding the substantial tax reduction, the GST collection in the first six months of this year has shown a significant improvement compared to the first year. The average monthly tax collected in the first year was Rs 89,700 crore compared to Rs 97,100 crore per month in the second year,” the minister wrote in a blog.
The overall GST collections for October (collected in November) dropped to Rs 97,637 crore from Rs 1 lakh crore collected in the previous month. These latest figures sustained worries over a major GST revenue deficit for the Centre , although November collections were marginally higher than the monthly average of Rs 97,039 crore in the April-November period.
A report by the country’s largest bank State Bank of India estimated that federal and state governments could face a shortfall of about Rs 90,000 crore in GST tax collections in the current fiscal year against the target of Rs 12.9 lakh crore.
Source :- Financialexpress.com