Focus Goa: GST

focus goa / gst @businessgoamagazine States look at GST revenue shortfall while Goa urges Centre to disburse GST compensation due, on an urgent basis

The Centre has informed States that the estimated shortfall of `2.35 lakh crore this fiscal year can be met by borrowing from the market against future tax revenues In 2017, all the option. Most of the states States agreed to link their local taxes such as VAT into the new nationwide Goods will opt for option 2 where centre will do the borrowing on behalf of the State and it will be repaid along with interest from the cess collected”, Godinho added. and Services Tax, He also mentioned that in return for the the Centre has agreed to Centre promising extend the GST transition to make good any period beyond five years for

By sybil rodrigues after five years (of GST implementation) ending 2022 loss of revenue in the first five years. But with the economy slowing down, `70000 another three years. Godinho said that a meeting will be held in early September to note the decisions taken by various states and decide how to raise the amount to collect the

Union Finance Minister, from cess collection. crore-shortfall shortfall in the compensation Nirmala Sitharaman 2) The states can borrow was seen in the cess, what was the rightfully stated that there was no the entire `2.35 lakh crore last fiscal year due of the States and this proposal to raise tax rates to make up for the shortfall that has been aggravated by the COVID-19 pandemic hitting economic activity. shortfalls under the special window. If the states agree to either of the options, it would effectively mean that cess and this year it is estimated to widen to `2.35 lakh crore would probably necessitate a change in law. While States like Goa were more muffled in their criticism, non-NDA ruled

Sitharaman has cited would continue beyond five states were against the a legal opinion from the years of GST rollout. the pending dues. Centre’s move to ask States to Attorney General, eliminating Meanwhile, the cash Godinho said, “Our plea borrow and meet the deficit. the option of the Centre strapped Goa Government was simple. Bigger States like “The revenue shortfall making up for the shortfall has asked the Centre to Maharashtra have pending in GST collections has to from either its coffers or by urgently release the `1080 dues of `22000 crore and be compensated by the borrowing on its balance crore of GST compensation more, but Goa’s dues are just Centre, this is the law. It is a sheet. due to Goa from the `11000 5% of this” constitutional provision. All

The Centre has also crore that the Centre has in its Godinho further stated States have made this demand made a distinction between kitty of GST cess. that Goa is disinclined to that the Centre should release revenue lost due to State Transport Minister, higher market borrowings at the compensation to those implementation of the GST Mauvin Godinho, after the high interest rates as it would States that have not been and the economic slowdown GST council meeting, stated put the State in a ‘debt trap’. paid,” said Godinho. arising out of the COVID that the State has sought “We will brief the Chief Subsequently in the third crisis. The government said immediate disbursement of Minister and we will choose week of September, the GST its legal obligation was only to compensate states arising out of the GST rollout. The Centre has given two options for borrowing by states so as to meet estimated “The revenue shortfall in GST collections has to be compensated by the Centre, this is the law. It is a constitutional provision. All States council will meet once again to review matters. In 2017, all States agreed to link their local taxes such as VAT into the new nationwide goods and services tax GST compensation shortfall have made this in return for the Centre of this year. demand that the Centre promising to make good any The two options are: should release the loss of revenue in the first five 1) A special window can compensation to those years. But with the economy be provided to the states in consultation with the RBI at States that have not been paid” slowing down, ` 70000 croreshortfall was seen in the last a reasonable interest rate for Mauvin Godinho fiscal year and this year it is borrowing of `97000 crore. Minister for Transport, estimated to widen to `2.35 The amount can be repaid Representative to the GST Council lakh crore