Gujarat: Rs 60,000 crore tax dues pending; 58% listed as non-recoverable

AHMEDABAD: As the goods and services tax (GST) regime is at the cusp of completing five years, from next month, Gujarat and other states will not get compensation from the Centre to balance protected GST revenue.
At a time when the state's average growth in tax collection does not meet the projected levels, Gujarat has pending tax dues of Rs 60,000 crore, according to state commercial tax department. This figure is till February 2022 and includes GST, central sales tax (CST) and value added tax (VAT).
Of these, an estimated 58% or Rs 35,000 crore is listed as non-recoverable dues, according to department officials.
"The reasons are - the funds are stuck with the National Company Law Tribunal, or they belong to sick units or a non-recovery certificate has been issued or in certain cases the companies have closed or bogus dealers are untraceable. The pending recoveries are only a loss to the state exchequer," said a well-placed source.
When GST was rolled out, the Centre had promised protected revenue at a 14% growth rate. Overall GST revenue for the past three years i.e., in 2019, 2020 and 2021, has grown by an average of 10.8% year-on-year.
The state commercial tax department has thus moved its focus to compliance and recovery. Estimates by department officials suggest that recoveries of Rs 60,000 crore are pending till February 2022.
"The focus is on improved compliance and recovery. When the state will see revenue dip, it is important to plug loopholes and nab evaders. We have roped in IT companies to make business intelligence softwares. Our economic intelligence unit is also aggressively identifying potential tax evaders to stop evasion and recover unpaid taxes," said Milind Torwane, state commercial tax commissioner.
Gujarat recently received Rs 3,336 crore as compensation from the Centre, which included dues till May 31, 2022.
The fall in revenue of the states will affect the government's capital expenditure, according to economic experts.
"Expenditure of the state will be affected in the absence of compensation from the Centre. It is not just Gujarat which will suffer but also other states that have large manufacturing sectors. Overall demand may weaken with higher inflation projections and this in turn may prove an additional dampener for tax collection, and in turn state revenues," said Sebastian Morris, professor of economics, Indian Institute of Management, Ahmedabad (IIM-A).
Gujarat clocked substantial growth in its tax mop-up over the past two months, albeit with low-base effect. In the current scenario with rising inflation and slowing industrial production, how growth in tax collection is sustained remains to be seen.