Centre to revise states’ GST shortfall estimate

NEW DELHI:  Ahead of the GST council meeting on May 28, Finance Minister Nirmala Sitharaman has asked the Revenue Department to come up with revised GST revenue shortfall numbers for this financial year given the Covid-induced lockdowns imposed across states. “A fresh assessment of the GST collection shortfall is required ahead of the Council meeting. While some emergency situations were accounted for, the second wave had been more devastating and longer than expected. We will be ready with the numbers ahead of the meeting,” a senior official from the revenue department told TNIE. 

Earlier, the finance ministry had projected GST revenue shortfall to be to the tune of Rs 1,56,164 crore for the current financial year (FY22). However, it had not taken into account the severity of the second Covid-19 wave. As such, a fresh estimate has to be made before the Council meeting.

According to sources, the accumulation in compensation kitty had been falling short even before the pandemic broke out. Fresh lockdowns in industrial pockets like Gujarat, Chennai, Mumbai, Delhi-NCR and Bengaluru are bound to  further hit collections. Moreover, states have also been pressing for waiver of GST on critical items such as vaccines.

In April, the GST collection came in at Rs 1.41 lakh crore,  14 per cent higher than that in March 2021. While this was a record high, experts said the clear picture regarding GST collections for April would emerge only in May and June. Last week, West Bengal finance minister Amit Mitra also highlighted this matter in a letter addressed to Nirmala Sitharaman.

“May I point out that among many matters that need to be discussed most urgently at the GST Council, is the alarming shortfall that is expected in the compensation to states. As per GoI, the shortfall was expected to be to the tune of Rs 1,56,164 crore in 2021-22 without taking into consideration the impact of Covid Wave-2,” Mitra wrote in the letter to Sitharaman Even last year, the compensation issue became a sticky point. But after several heated discussions, both the Centre and the states agreed to meet an estimated GST revenue shortfall of Rs `1.10 lakh crore.