Economic slowdown: Centre staring at Rs 63,200 cr shortfall in GST compensation cess collection, says report

The Centre is now staring at a huge shortfall of over Rs 60,000 crore in GST compensation cess collection due to slowdown in revenues, according to news reports. As per a presentation made to the GST Council, the compensation requirement for states is expected to be about Rs 1.6 lakh crore for the ongoing fiscal, at a growth rate of 5 percent, said a report in The Economic Times. However, compensation cess collections are expected to be about Rs 96,800 crore, leading to a huge shortfall of Rs 63,200 crore, the report said.

Meanwhile, rating agency ICRA has estimated a shortfall of Rs 2.2 lakh crore for all states. GST revenue collection crossed the Rs 1 lakh crore-mark after a gap of three months in November with the revenue growing by 6 percent to Rs 1.03 lakh crore in the month. The GST collection was Rs 95,380 crore in October while it was Rs 97,637 crore November 2018. Of gross Rs 1,03,492 crore in November, CGST is Rs 19,592 crore, SGST is Rs 27,144 crore, IGST is Rs 49,028 crore (including Rs 20,948 crore collected on imports) and Cess is Rs 7,727 crore (including Rs 869 crore collected on imports), an official statement said. [caption id=“attachment_4799391” align=“alignleft” width=“380”]  Representational image. News18.[/caption] Compensation cess was introduced as relief for States for the loss of revenues arising from the implementation of GST. States, in lieu of giving up their powers to collect taxes on goods and services after local levies were subsumed under the GST, were guaranteed a 14 percent tax revenue growth in the first five years after GST implementation by the Central government. States’ tax revenue as of FY16 is considered as the base year for the calculation of this 14 percent growth. Any shortfall against it is supposed to be compensated by the Centre using the funds specifically collected as compensation cess. Compensation cess is levied on five products considered to be ‘sin’ or luxury goods. Facing heat over delay in payment of GST compensation, the central government on 16 December released Rs 35,298 crore to states to make up for the loss of revenue due to rollout of the Goods and Services Tax (GST), according to a PTI report. When GST was rolled out on 1 July 2017, states were through legislation promised to be compensated for the loss of revenue as not just their taxes such as VAT were being subsumed in the new levy but also their right to levy taxes was being snatched. The compensation amount was fixed at 14 percent on top of revenue in the base year of 2016-17. The corpus for paying compensation was collected by levying a cess on top of GST rates on tobacco products, cigarettes, aerated water, automobiles, and coal. This compensation was to be released after every two months but the same was pending since August, drawing protests from states, particularly non-BJP ruled ones. --With PTI inputs