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Great expectations wither! UP, Kerala, Rajasthan sharply revise GST targets

A clearer picture would emerge when more states announce their 2020-21 budgets. So far only five states have come out with their budgets

twitter-logo Dipak Mondal        Last Updated: February 28, 2020  | 13:51 IST
Great expectations wither! UP, Kerala, Rajasthan sharply revise GST targets

Budgets recently announced by different states indicate apprehensions over huge shortfall in GST collections this year. Many states have sharply revised their GST revenue targets for 2019-20.

The Kerala budget has revised its 2019-20 GST collection target (it includes state GST, share in the Central GST and transfer from Integrated GST) downward by 22 per cent to Rs 29,300 crore. It had earlier budgeted for a collection of Rs 37,600 crore.

Uttar Pradesh, the largest state in terms of population and second largest in term of Gross State Domestic Product (GSDP), has revised its 2019-20 GST collection from earlier Rs 1.10 lakh crore to Rs 94,550 crore, a shortfall of 14 per cent.

Rajasthan had budgeted for a GST collection of Rs 41,108 crore in 2019-20, but now it has revised the same downward by 13 per cent to Rs 35,800 crore. Orissa has revised its GST collection target for the year from Rs 25,600 crore to Rs 22,900 crore, a drop of 10 per cent. West Bengal has also revised its GST collection (SGST and CGST) by 7 per cent to Rs 46,500 from Rs 49,950 crore.

ALSO READ:Centre doles out Rs 19,950 crore GST compensation to states, UTs

State finance ministers have been complainin about shortfall in GST collections for some time now and how it is creating problems for the states' finances. In his Budget speech, Kerala Finance Minister Thomas Isaac's said: "The average growth of the state expenditure during the period from 2013-14 to 2018-19 was 16.13 per cent, whereas the revenue income during the period rose only by 13.26 per cent. This gap between income and expenditure has accelerated the crisis... the revenue deficit could be reduced and the state could be led towards a stable financial path by increasing revenue income by 18-20 per cent. However, the expected growth in GST collection has not been materialised."

A clearer picture would emerge when more states announce their 2020-21 budgets. So far only five states have come out with their budgets.

However, when you compare the revised estimates for 2019-20 with actual collections in 2018-19, states show a decent growth in GST collection. For example, 2019-20 revised estimates for Uttar Pradesh at Rs 94,550 crore is 14 per cent higher than Rs 82,558 crore actually collected in the previous year. In case of West Bengal, the revised estimate is 14 per cent higher than the actual collection in the previous year. In case of Kerala, the revised estimate in 2019-20 is 13 per cent higher than the actual GST collection in the previous year.

Unless the current year GST collection figures are further revised downwards, some states are just about managing to clock the 14 per cent growth in GST collection. The 14 per cent figure is important as the Centre has promised the states to compensate any revenue deficit due to GST implementation, with deficit to be calculated based on a 14 per cent year-on-year revenue growth (from taxes subsumed under GST) since 2015-16.

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The compensation to be paid by the Centre to the states itself has become an issue of contention between them, with the former announcing that any compensation to the latter would be from collections made through compensation cess, an additional levy on goods that attract 28 per cent GST.

But various agencies believe that the compensation cess would not be sufficient to plug the states' revenue gap.

"GST compensation payments are unlikely to be adequate. States were already complaining about delay in payments and the mechanism, when GST cess collections fall short, to ensure their 14 per cent GST revenue guarantee till 2022," says Sreejith Balasubramian, economist, IDFC Mutual Fund. He estimates that compensation cess would fall short by Rs 20,000 crore in 2019-20 and Rs 43,000 crore in 2020-21. The Centre has so far released Rs 1.20 lakh crore towards GST Compensation to states.

Meanwhile, the Centre has also revised its GST collection target for 2019-20 from Rs 6.63 lakh crore to Rs 6.12 lakh crore.

So far the total GST collection (both at the Centre and states level) has been Rs 10.19 lakh crore till January. Even if we consider a 50-50 share between states and the Centre, the monthly GST collection for the remaining two months have to be Rs 1 lakh crore each,

ALSO READ:India's GST collections below potential, says IMF

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