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Our Bureau Twenty-five States and Union Territories have reported a shortfall in GST collections during the first five months of this fiscal despite the national average shortfall narrowing down to 13 per cent from 16 per cent in July 2017-March 2018.
Leading the ranks in shortfall in GST collections is Puducherry with 42 per cent. Reporting surpluses are Andhra Pradesh and the five North-Eastern States.
The GST Council reviewed the revenue position during its 30th meeting here on Friday. The shortfall is calculated on the basis of a projected growth rate of 14 per cent.
States are compensated fully for the shortfall through a compensation cess that a Constitutional Amendment has assured for five years.
Based on a decision taken at the previous GST Council meeting, Finance Secretary Hasmukh Adhia visited Puducherry, J&K, Himachal Pradesh and Punjab to assess the revenue shortfall. An in-built structural design of GST — wherein the taxes are levied on the destination-based principle — was found to be one of the reasons for the shortfall.
In the States suffering huge revenue gaps, the contribution from subsumed taxes such as Central sales tax (Puducherry) and purchase tax (Punjab) in the pre-GST regime to the States’ exchequer was substantial. For example, Punjab got over ₹3,000 crore from purchase tax in FY16.
Meanwhile, the government is keeping its fingers crossed on meeting the GST collection target of ₹13 lakh-crore this fiscal. “We are in the middle of the year...there is festival season coming...We will try and come as close to the target (as possible),” Finance Minister Arun Jaitley told the media after the meeting.
“The more it (shortfall) comes closer to zero at the expiry of the fifth year, the more the States will be closer to achieving those targets,” he said.
In FY18, the Centre had released ₹41,147 crore to the States as GST compensation to ensure that their revenues stayed protected at 14 per cent of the base year tax collection (FY16). In current fiscal, there was a spike in the bi-monthly GST compensation paid to the States by the Centre in June-July.
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