05.07.2022: Centre, States yet to reap higher revenue benefit of GST: NIPFP working paper

The Centre and states are yet to reap the benefit of the goods and services tax (GST) regime, which recently completed five years of implementation, according to a working paper by the National Institute of Public Finance and Policy (NIPFP).

“By increasing revenue mobilisation from ‘Non-Shareable Duties’ and ‘Cesses on Commodities’ under Union Excise Duties, the Union could manage the revenue shortfall in GST,” Sacchidananda Mukherjee, an associate professor at the institute, said in the abstract. “The GST compensation (both from the GST compensation fund as well as back-to-back loans from the Centre) helped states to sustain the revenue stream as prevalent prior to introduction of GST.”

However, as the GST compensation has ended, some states may face revenue stress, Mukherjee observed.

States with higher dependence on GST compensation and SGST, such as Goa, Punjab and Chhattisgarh, may face relatively higher revenue stress than other states, he added.

The working paper compared the revenue performance for the period 2005-06 to 2021-22.

A dozen states have sought an extension of GST compensation beyond the deadline of June 30 this year as they stare at a potential shortfall in revenues. The Centre has acknowledged their suggestion but has not been in favour of such a dispensation. The GST compensation cess has been extended to March 2026 to repay the special borrowings over the last two fiscal years that were used to plug the shortfall in the GST cess collections.

The issue of GST compensation is expected to come up again when the GST Council meets in the first week of August.

GST collections have risen in recent months and the monthly revenues could stay above Rs 1.4 lakh crore, officials have said.

Source: MoneyControl

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