Hit hard by the Covid-19 induced lockdown and the central government stepping back from its commitment on the Goods and Services Tax (GST) compensation to the states, the fundsstarved Punjab government is still short by over Rs 9,044 crore (43%) to meet its annual target of over Rs 15,858 crore GST collection.
At the same time, the Union government has finally released Rs 1,385.96 crore to the Punjab government this month on account of its share of the Goods and Services Tax (GST) compensation out of total of around Rs 4,000 crore that the Centre had borrowed since October. The first weekly instalment of Rs 475.80 crore was released on December 1, the second and the third instalments of Rs 455.08 crore each were released on December 7 and December 14.
The state government had not received GST compensation from the Centre since April and this had compounded its financial woes and had stalled development works. The central government had guaranteed 14% year-on-year growth to the states and UTs over the 2015-16 base year at the time of switching over to the GST regime and they were to be compensated for the GST shortfall.
Initially, the Amarinder Singh-led Congress government in Punjab had shown strong resistance to the central government’s options for the states to choose either of the two borrowing plans to meet the revenue shortfall due to the GST implementation. But finally, due to the falling state revenue, the Punjab government also succumbed under pressure last month, like the other states, and accepted Option 1. Under this formula, the Punjab government would get Rs 8,359 crore amount of the total borrowings carried out by the central government on behalf of the states and the Union Territories. The Punjab government has also been permitted to opt for additional marketing borrowing to meet Covid-19 related shortfall amounting to Rs 3,033 crore, which is 0.5% of its state gross domestic product (SGDP).
Punjab taxation commissioner Nilkanth S Avhad said, “Certainly there is going to be a shortfall in GST collection this year because of the Covid-19 pandemic. I cannot comment at this stage where we will end up exactly.”
The Punjab government could collect over Rs 1,067 crore GST in the month of November and the protected GST revenue for the month was Rs 2,403 crore. Though the GST collection for the months of September (Rs 1,055 crore) and October (Rs 1,060 crore) this year was more than the corresponding months of 2019, again the GST collection dipped to Rs 6,814 crore in November this year as against Rs 8,842 crore in November 2019.
However, the state taxation commissioner said there had been satisfactory collection of the value added tax (VAT) as Punjab had been able to collect over Rs 3,689 crore from April to November. “There was a big fall earlier but now there is a good growth,” he added.
The Punjab government collected over Rs 765 crore from VAT and central sales tax (CST) most of which comes from the sale of petrol and diesel. This collection was over Rs 448 crore in November last year, which depicts an increase of over 70 per cent this November. The overall VAT and CST revenue collection from April to November this year had been Rs 3,802 crore, an increase of 4.90 per cent compared to the corresponding period of 2019.