Karnataka finding it tough to meet GST target

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Despite growing at a rate of about 14% annually, Karnataka could be staring at the prospect of not meeting the protected revenue in Goods and Services Tax (GST) by 2022 when the Centre stops compensating the deficit between the protected and actual tax collected. While the 2018-19 fiscal saw a growth of around 13% in GST collection in the State, it was 14% in the first four months of 2019-20. Officials say collection would have to grow at a rate of 25% to 30% annually to bring the deficit down to zero.

When GST was launched in July 2017, the Centre kept 2015-16 as the benchmark for future projections and assured compensation for any shortfall in collection by the State. The base year (2015-16) revenue was calculated at ₹36,144 crore while as the protected revenue for Karnataka by 2021-22 was fixed at ₹79,335 crore. “While Karnataka is growing at around 14%, we still cannot meet the protected revenue,” a senior commercial tax official acknowledged. “There are shortfall issues that we are trying to raise in the GST council. Other States too have similar problems.” Another official in the department predicted that Karnataka could end up with a deficit of around ₹10,000 crore, considering the current growth rate, in 2022.

According to the data available, in 2018-19 Karnataka collected GST of ₹42,890 crore as against the protected revenue of ₹53,549 crore and ended with a deficit of ₹10,659 crore (20%), which was compensated by the Centre. In 2017-18, the year when GST was launched, Karnataka could collect GST of ₹24,182 crore as against the protected collection of ₹31,312 crore, a deficit of 23%. In the current financial year, the protected revenue is ₹61,046 crore and by July, the State collected nearly ₹15,000 crore a shortfall of about 27% for the period between April and July. In the next fiscal, the State’s protected revenue is ₹69,592 crore.

Commercial tax sources said that though GST collection is growing, the protected amount fixed by the Centre is high and is the reason for the huge deficit. “The collection is less against the protected revenue as the GST council has been reducing the tax rate regularly on several items. While the average rate of tax in the earlier Value Added Tax (VAT) regime was 14.5%, in GST it is as high as 28% on some items. A majority of the items fall in the 12% to 18% bracket,” a source said.

As the tax department is racing against time to raise GST collections in the State before the compensation period ends, a senior official pointed out that the department was trying to make use of data analytics to bridge the gap. “Wherever possible, we are trying to plug loopholes and widen the tax net,” a source said.

Read more at: https://www.thehindu.com/news/national/karnataka/karnataka-finding-it-tough-to-meet-gst-target/article29675271.ece