Trouble ahead: 37% shortfall, but revenue protected for five years; state needs to find additional sources
The Congress government in Punjab was gung-ho about the goods and services tax (GST), with both chief minister Capt Amarinder Singh and finance minister Manpreet Singh Badal calling it a “game changer” for the fund-crunched state when it was rolled out in July last year.
But GST has been anything but that so far. Punjab is among the states with maximum shortfall in revenue collection under GST in the first nine months after rollout of the new indirect tax regime across the country. The state has reported an average shortfall of 37% (Rs 580 crore) in collection against the protected revenue of Rs 1,567 crore per month during this period, according to the latest revenue trends data (up to April 2018) compiled by the GST council secretariat.
Only Himachal Pradesh (42%), Uttarakhand (39%), Bihar (38%) and Jammu and Kashmir (37%) are stated that have reported a higher or equal shortfall as compared to Punjab. On the other hand, states such as Maharashtra (3%), Tamil Nadu (3%), Andhra Pradesh (7%), Uttar Pradesh (12%) and Haryana (18%) have done better in revenue collection. In actual terms, the average monthly gap of Rs 580 crore in Punjab is the second highest in the country after Karnataka, where the shortfall is Rs 876 crore.
Though there is shortfall in collection, the revenue of states is protected with an annual growth of 14% over the 2015-16 revenue base under the GST Act for five years. The state has been compensated by the Centre for the shortfall from the cess fund created for this purpose. Overall GST revenue collection of the country stood at Rs 7.4 lakh crore during August 2017 to April 2018, including cess of Rs 62,614 crore that is used for the states’ compensation.
However, the revenue gap does not augur well for Punjab in the long run, because it has not shown the improvement in tax collection anticipated in states with strong consumption base. While the revenue shortfall was 39% in October 2017, it went up to 45% in December. In comparison, neighbouring Haryana has shown a significant improvement in its revenue — the shortfall has come down from 40% in August 2017 to 18% on an average.
Additional chief secretary-cum-financial commissioner, taxation, MP Singh said the department is closely examining GST collection figures to ascertain reasons for the shortfall.
VK Garg, financial adviser to the chief minister, said the purchase tax of 4% and an infrastructure levy of 2% on foodgrains were subsumed in GST. “As there is no GST on foodgrains now, there is a loss of revenue to the tune of Rs 4,000 crore per annum. This is the gap in revenue stream. The state will have to build revenue in some other way as well as curtail expenditure to manage its finances once the protection granted under GST comes to an end,” he said.
Punjab’s officials are hopeful of getting additional revenue as and when the Centre carries out settlement of integrated-GST funds. The Centre has IGST funds to the tune of Rs 1.81 lakh crore in its kitty.
Source- Hindustan Times.