GST a challenge for Gujarat govt: 15th Finance Commission

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On a visit to Gujarat, the chairman of the 15th Finance Commission (FC), NK Singh, has said that the GST is a big challenge ahead of the Gujarat government. Singh said this in the context of the compensation received by the state from the Center against deficit of GST and low increase in tax revenues. During the Gujarat visit on Monday, the FC panel expressed inclination towards performance-based grants to the state.

Singh said: “One big challenge is GST because so far, they have not looked into the medium-term projection of GST. The projection we seem to have received is at around 8% to 8.5%, and 14% guarantee from the Center is for a particular period only. Going by that, the tax buoyancy number does not suggest that 14% is likely to be sustained for the period of five years of 15th FC, therefore this is something which is needed to be considered. That is why we are concerned that we would need to factor this as part of revenue projections while coming to some definite calculation with regard to the fiscal situation of each state, as GST numbers are a very critical component on revenue receipts.”

The panel of the 15th FC met representatives of the state government, including CM Vijay Rupani, Deputy CM Nitin Patel, Chief Secretary Dr JN Singh and other senior officials of the government. The state government made a presentation before the panel and sought an increase in grants for Gujarat. The panel also met representatives of the BJP, Congress, NCP and other political parties.

After the meetings, FC members briefed media persons, during which they expressed their admiration for the economic development and financial management of the state. The panel was particularly impressed with the reduction of Gujarat’s debt-to-GDP ratio to 20% (to be achieved by 2023-24).

However, the commission was critical of the working of the Gujarat State Finance Commission and indicated the need for the state commission to be orderly and to conform to Article 280 of the Constitution. The chairman also added that Gujarat has suggested reforms to the National Disaster Relief Fund policy considering the state is prone to natural disasters.

During the field visit, the commission panel will visit Sardar Sarovar Dam, Statue of Unity and GIFT City on Tuesday. It will also meet representatives of trade and industry in the evening.

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