GST revenue of states, UTs decline over 30% during April-August

Key losers included states like Maharashtra which recorded a drop of 31.3% in its GST revenue in the five months after the lockdown was first imposed in the country; Tamil Nadu’s revenue was also down 35.2%, while Gujarat’s revenue fell 32.2%.

Business Desk, ETV Bharat: The coronavirus pandemic wreaked havoc on the economies of various states and union territories (UTs) in India, pulling down their combined goods and services tax (GST) revenues by 30.4% during April-Aug 2020 compared with the same period a year ago.

In a written reply to a question raised in Lok Sabha regarding the details of state-wise decline in GST revenue, minister of state for finance Anurag Thakur said that the total revenue of states and UTs stood at Rs 2.72 trillion during April-August compared with Rs 3.9 trillion in the year-ago period.

Among the major losers were Maharashtra whose GST revenue dropped 31.3% during the period, Tamil Nadu’s revenue was down 35.2%, Gujarat’s revenue fell 32.2%, while New Delhi’s revenue was down 35.7%.

Some states/UTs like Jharkhand, Uttarakhand, Mizoram, Goa and Daman and Diu saw an over 40% drop in their GST revenue during April-August, while Nagaland was the only state to have recorded an increase in revenue of 11.5%.

For the Centre, the actual net GST collection till August 2020 stood at Rs 1.81 trillion, which is just 26.2% of the total budgeted estimate of Rs 6.9 trillion for full year 2020-21, Thakur stated in his written reply.

He added that the reasons for lower tax collection included nationwide lockdown measures implemented since March 2020 consequent to global Covid-19 pandemic that led to limited economic activities and extension of GST return filings timelines without payment of interest, late fee or penalty etc.

“The BE (budgeted estimates) for FY 2020-21 of GST in the Union Budget 2020-21 were projected on the basis of assumption of higher growth of GDP… however as per CSO, MoS&PI press release (on 31st August, 2020), the Nominal GDP for Q1 (April-June) 2020-21 shows a contraction of 22.6% which is one of the major reason for revenue shortfall in GST,” Thakur added.

GST revenue, State-wise April-Aug 2020-21 YoY

GST compensation

As a result of the revenue shortfall, the total provisional GST compensation due to 31 states and UTs for 2020-21 put together stands at Rs 1.51 trillion, as per data shared in another written reply to a question in the Lok Sabha.

The provisional GST compensation due to states/UTs for 2020-21 was highest for Maharashtra at Rs 22,485 crore, followed by Karnataka (Rs 13,763 crore), Uttar Pradesh (Rs 11,742 crore), Gujarat (Rs 11,563 crore) and Tamil Nadu (Rs 11,269 crore).

For 2020-21, states are expecting a GST revenue shortfall of Rs 2.35 lakh crore. Of this, about Rs 97,000 crore is on account of GST implementation, while the rest is due to the impact of lockdown on states’ revenues, the Centre had said earlier.

In the 41st GST Council meeting in August, the Centre gave states two options to meet their GST compensation shortfall for the current fiscal year. States can either borrow Rs 97,000 crore from a special window facilitated by the Reserve Bank of India (RBI), or borrow the entire Rs 2.35 lakh crore from the market, with the Centre proposing extending the compensation cess levied on luxury, demerit and sin goods beyond 2022 to repay the borrowing.

"Some states have objected to the proposed two options. They are being requested to exercise one of the two options,” Thakur said in his written reply.