Govt anticipates Rs 40,000 crore deficit in FY20 GST collections; states express concern over fall in compensation

The government is anticipating a deficit of nearly Rs 40,000 crore in the GST collections as compared to what it had budgeted for FY 20 (2019-20).

The Centre had reportedly informed the GST Council, which met in Goa last Friday, about the likely shortfall, which may put stress on states' compensation.

The GST Council, which met after Finance Minister Nirmala Sitharaman announced the slash in corporate tax rates, hailed her bold decision, but state FMs voiced their concerns over drop in revenue.

Also Read: GST tax base doubles, but collection up only by 14% in Karnataka

Indian economy grew by merely 5 per cent in the April-June quarter, down from 5.8 per cent in the previous quarter. Registering a continuous downward spiral, the GDP growth for the first quarter of FY20 has been slowest in more than six years. The previous low in GDP growth was recorded at 4.3 per cent in the January-March quarter of 2012-13.

The Centre as a part of the GST bargain had given its consent to compensate states for five years, if the annual revenue growth rate was less than 14%.

Also Read: GST Council meet: No relief for ailing auto sector; hotels, catering get breather

As per the GST law, the compensation is paid only from a fund where the cess is collected. Meanwhile, the government has evaluated an estimated collection of Rs 1 lakh crore cess on sin and luxury goods in FY20 (2019-20) or Rs 8,000 crore a month. However, the August collection of Rs 7,272 crore has sparked a possibility of a lower than budgeted collection, the report said.

The centre has already given Rs 45,784 crore as compensation to states in the first four months of 2019. Furthermore, the states are also asking for an extension in the compensation period by another three years.

The centre meanwhile is pinning its hopes on a rebound in revenues when growth picks up in the forthcoming quarters.

Also Read: GST rate cut on auto would lead to revenue loss of up to Rs 45,000 crore: Sushil Modi