Punjab has reported the highest shortfall in revenue collection among the states under the goods and services tax (GST) in the first five months of the financial year 2019-20. It has a shortfall of 44% in collection against the assured GST revenue of Rs 2,037 per month during this period after the settlement of the integrated goods and services tax (IGST), according to revenue trends data shared by the GST Council Secretariat in a meeting last month. Neighbouring Himachal Pradesh has the second-highest revenue shortfall of 40% followed by Goa (37%), Jammu and Kashmir (36%), and Uttarakhand (34%). The all-India average revenue gap for assured state GST is about 21%. Delhi, Chhattisgarh, Karnataka, West Bengal, Kerala and Rajasthan are among the states facing substantial revenue shortfall. Haryana had a revenue gap of 24% between the guaranteed GST revenue and the gross state GST post-settlement in the first few months but has brought it down to 20% with a spike in collections in the past two months.
Under the new indirect tax regime, the states have been guaranteed a 14% year-on-year (y-o-y) growth in their GST revenue over the financial year 2015-16 base and they are to be compensated by the central government for any shortfall. Punjab’s monthly protected state-GST, which was Rs 1,567 crore and Rs 1,787 crore in financial years 2017-18 and 2018-19, respectively, stands at Rs 2,037 per month this year after the guaranteed y-o-y increase, according to officials of state excise and taxation department. Last week, state’s finance minister Manpreet Singh Badal and his counterparts in West Bengal, Kerala, Delhi, and Rajasthan had together voiced concern over the delay in the release of GST compensation for the August-September period. Manpreet said that GST compensation totalling Rs 2,100 crore for August and September was due, besides additional arrears of Rs 2,000 crore. “The outstanding amount has put the state in a tight financial position, hurting the development programmes,” he told reporters, adding that the central government has not given any “explanation for delay”.
A senior excise and taxation department official said the arrears were on account of non-inclusion of receipts amounting to roughly Rs 600 crore at the time of finalisation of assured revenue for the base year (2015-16) due to delayed of verification of accounts. “The accountant general had not verified these receipts when the base year revenue was being decided and duly verified documents were submitted later. The matter is under consideration of the central ministry,” said the official, who did not want to be named. As the Centre releases the GST compensation bi-monthly from the cess kitty, the state government was expecting Rs 2,100 crore by October 31, but is still to get the money. The delay has compounded the financial woes of the state govenrment which is short of its revenue receipts target for the year and has had to scrape the bottom of the barrel to meet its expenditure. Additional chief secretary (taxation) MP Singh, who has been asked by Manpreet Badal to ascertain reasons for the delay in the release of GST compensation, said there was no indication from the revenue department of the Union finance ministry by when the compensation would be released.
The Centre is facing its own problems due to a dip in GST. The overall monthly GST collections have borne the brunt of a slowing down economy, dropping below the Rs 1 lakh crore-mark in August, September and October this year. The compensation cess collected over and above the GST rate on luxury items is also down. Punjab, which saw GST as a ‘game-changer’, had recorded a revenue gap of 37% during the financial year 2018-19 as well. When contacted, excise and taxation commissioner Vivek Pratap Singh said there were two reasons for this shortfall in revenue. “One, there was an average revenue gap of 20% across the country with some variations in different regions. Then, we lost about 23% as the purchase tax on all commodities, except cotton, was subsumed in GST. The commensurate increase was not there,” he said. He said though the GST collection was short of the target set in the budgetary estimates for the current fiscal, there was an increase of about 10% in the first half over the actual collection during the corresponding period of 2018-19.