Kerala failed to tap IGST share of Rs 25,000 crore, says report

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The Expenditure Review Committee appointed by the Kerala Government has said in its report that the state had lost Rs 25,000 crore over the last five years due to failure in revising the Integrated Goods and Services Tax (IGST) return forms.

(IGST, which is one of the three components of Goods and Services Tax or GST, is levied when there is an inter-state transfer of goods and services. The other two GST components are CGST or Central Goods and Services Tax and SGST or State Goods and Services Tax.)

The report, which estimated that Kerala had suffered a loss of Rs 5,000 crore each year, also includes detailed suggestions on revising the IGST returns and the points to be raised before the GST Council. The report was submitted in December 2022.

Incidentally, the state government’s latest budget has increased cess on fuel and various other taxes even when this report which included suggestions to shore up revenue by other means was available with the authorities. While the report’s recommendations, if implemented, could have given the state government Rs 5,000 crore, the cess on petrol and diesel is expected to bring a mere Rs 750 crore.

The Expenditure Review Committee was set up on September 16, 2022 and the panel submitted its report on December 5.

The report said that Kerala has not been receiving its share of IGST even though it is a consumer state. IGST is levied on goods which are manufactured in one state and sold in another. The amount collected is shared equally between the Centre and the state where the sale takes place.

As a consumer state, Kerala is eligible for 50-percent IGST share of any item sold here. When a customer in Kerala buys an item manufactured in another state, the tax included in the price is received by the manufacturer in the other state. The manufacturer transfers the tax as IGST to the Central Government, which immediately takes its share of 50 per cent. However, Kerala needs to demand its 50-per cent share of IGST with proper documents to receive the amount.

The Expenditure Review Committee report said that customers in Kerala who file GST returns should give correct details in order to enable the state government to claim its share of IGST. A system should be put in place for this, added the report.

Meanwhile, financial experts said that the state government should have tabled the report in the Assembly before presenting the budget. This would have enlightened the public on the matter as well as given an opportunity for the Finance Minister to raise it at the GST Council meeting and find a solution, they said.

“Awareness should be created among the public on how to fill the columns properly while filing GST returns. They should be made to realize that Kerala wouldn’t receive its IGST share if the returns are not filed,” said an expert.

“Kerala government needn’t blame the Centre for not receiving IGST share. The state should prove that it is eligible for the amount. Kerala has to argue before the GST Council to revise the return forms to make the procedures easier,” said the expert.

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