Revenue shortfall of states under GST was one of the major discussions in the 30th meeting of GST Council on Friday. While six states/union territories are posting a revenue surplus under the indirect tax regime, rest 25 are facing a revenue shortfall ranging from 3 per cent to 42 per cent.
Finance Minister Arun Jaitley said the states faced an average 16 per cent shortfall in GST revenue collections in the first year of implementation (July 2017-March 2018) that has now narrowed to 13 per cent during April-August period of the current financial year. “As it goes on a glide path downwards, the more it comes closer to zero at the expiry of the fifth year, the more the states will be closer to achieving those targets,” he said.
Jaitley said one of the reasons for shortfall being faced by states is the existence of state-specific levies such as purchase tax, entry tax in the base year of 2015-16 that later got subsumed under GST after its implementation from July 1, 2017.
The states which are facing a revenue shortfall will require compensation funded by the levy of compensation cess under GST. Finance Secretary Hasmukh Adhia has visited five states facing revenue shortfall and submitted his report to the Council.
Six states — Mizoram, Arunachal, Manipur, Nagaland, Sikkim and Andhra Pradesh — are facing revenue surplus in current fiscal. The 10 states/UTs which are facing the highest revenue shortfall during April-August are Puducherry (42 per cent), Punjab and Himachal Pradesh (36 per cent each), Uttarakhand (35 per cent), Jammu & Kashmir (28 per cent), Chhattisgarh (26 per cent), Goa (25 per cent), Odisha (24 per cent), Karnataka and Bihar (20 per cent each).
Under GST, 2015-16 has been fixed as the base year for calculation of compensation to states in case of revenues falling short of 14 per cent growth over the base year during the first five years of GST.
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