GST collection shortfall: Governance reforms panel asks Punjab to cover gap

With the state 37% short of Goods and Services Tax (GST) collection in the first year, the Punjab Governance Reforms and Ethics Commission (PGREC) has advised the state government to go into reasons and take immediate steps to cover the gap before the revenue protection gets withdrawn in four years.

The reforms commission, headed by former chief secretary KR Lakhanpal, while expressing concern over the shortfall in tax collection, recommended to the state authorities to strive for ‘zero compensation’ by 2021-22.

The panel made the recommendation in its meeting last month, said a government functionary in the know of the matter.

The commission, which is entrusted with the task to give suggestions for fiscal prudence, additional resource mobilisation and improving quality of public expenditure, has chief secretary, additional chief secretary (governance reforms) and finance secretary as members.

A cause of worry

Punjab has reported the second highest shortfall of 37% in revenue collection among bigger states under the GST in first 10 months since the rollout of the new indirect tax regime across the country with only Bihar having a higher deficit at 38%, according to revenue trends data for the period from July 2017 to April 2018 compiled by the GST Council Secretariat.

In actual terms, the state’s average revenue shortfall was Rs 580 crore per month – the second highest after Rs 867 crore of Karnataka – against the protected monthly revenue of Rs 1,567 crore during the financial year 2017-18. While the revenue shortfall was 39% in October 2017, it went up to 45% in December 2017. Punjab is being compensated for the revenue shortfall from the cess fund created for this purpose. Under the GST Act, the revenue of states is protected with an annual growth of 14% over the 2015-16 revenue base for five years. However, the shortfall is a matter of serious worry for the government as the state was expected to see an uptick in revenue flows due to its strong consumption base.

‘Taking steps for better compliance’

Excise and taxation commissioner Vivek Pratap Singh said there were primarily two reasons for the revenue shortfall. “Before GST was rolled out in July last year, there was purchase tax on foodgrains and infrastructure development cess. As these were subsumed in GST, there was loss of revenue of about Rs 375 crore per month,” he said.

Also, the tax rates in Punjab were higher than many other states and these had come down for several commodities under GST. “The department is fully geared up to check evasion and curb leakages by using technology for data mining to ensure better tax compliance,” Vivek Pratap Singh said.