The state governments’ goods and services tax (GST) revenue shortfall may continue to be compensated till financial year 2024-25, i.e. for three more years after fiscal 2021-22, the final year prescribed under the law.
However, for the post-FY22 period, the ‘shortfall’ would be estimated taking into account the fact that GST revenue buoyancy has been lower than expected.
This means the annual growth rate to be assured for states will be lower than the current 14 per cent, for the post-FY22 period.
This view seems to have emerged in the 15th Finance Commission which analysed the pros and cons of the compensation mechanism, including the “moral hazard” of guaranteeing certain revenue growth for states. A final decision, of course, will be taken by the GST Council, with which the Commission will converse at the former’s Goa meeting on September 20. Meanwhile, addressing a group of journalists here on Friday, Finance Commission chairman NK Singh hinted at a balanced approach when it comes to deciding how the states’ share of the divisible pool of taxes would be distributed among them.