GST Shock For States

Many states are facing severe revenue constraints as GST collections remain subdued and centre delays transfer of their share of taxes

- Dipak Mondal

Even as the country was glued to protests against the Citizen Amendment Act, state representatives had gathered in the national capital on a wintery December evening to discuss something as mundane as improving collections from Goods and Services Tax (GST). But the 38th GST Council meeting, a stone’s throw from New Delhi’s protest site, Jantar Mantar, on December 18 also saw its share of protests, arguments and drama. Amid the gloom and doom in the economy that has resulted a big shortfall in GST collections, which has, in turn, led it to a delay in central government payments to states — the meeting, as was expected, turned out to be stormy, with state finance ministers up in arms against the Centre. The reasons were simple. A number of states are facing a big revenue shortfall due to GST implementation as they gave up their taxation powers to the Centre and GST is a consumption tax (consuming states gain at the cost of manufacturing states). Also, it is no secret that revenue growth from GST has been muted and the Centre is holding back payment of a part of the revenue meant to be disbursed to states — under GST, there is a provision that the Centre will compensate states for any loss due to implementation of GST for the first five years. The Centre is now saying it does not have enough money to pay.