GST implementation flawed; wouldn’t have backed it: Kerala FM Thomas Isaac

GST: A sharp fall in GST collections last month brought the sharp divisions within the GST council to the fore.

Thomas Isaac, Kerala Finance Minister, Sushil Modi, GST, Nirmala Sitharaman
Thomas Isaac, Kerala finance minister.

Goods and Services Tax: In little over two years since its implementation, the problems in implementation of a common nationwide goods and services tax (GST) have sparked a war of words between the NDA ruled states on the one hand and opposition ruled states like Kerala, Punjab and Madhya Pradesh on the other. The differences between the two groups came out in the open as soon as the data of GST collection for the month of September was released. The first salvo was fired by Kerala finance minister Thomas Isaac who, in a series of tweets, blamed poor implementation and savage rate cuts for fall in the GST collection. In September GST collection was nearly Rs 92,000 crore, lowest in 19 months and the second lowest since the implementation of GST in July 2017.

“If I had known that this was the level of preparation for the GST then we wouldn’t have accepted it,” said Kerala’s finance minister Thomas Isaac in an exclusive interview with the Financial Express Online.

As a finance minister Thomas Isaac is facing the challenge of reviving Kerala’s economy which is heavily dependent on revenue from lotteries and remittances sent by overseas Indians. A slowing economy makes his job even more difficult as his state was already grappling with a slowdown for the last 2-3 years. A fall in GST collections and the impact of stimulus announced by the Centre to shore up the economy will hurt states like Kerala in two ways. Not only Kerala’s share in IGST will come down but the state’s share in the divisible pool of the taxes will also come down as a result of the corporate tax cut announced by finance minister Nirmala Sitharaman.

It has come as a double whammy for states like Kerala. In a series of tweets, Thomas Isaac blamed several rate cuts over the last two years for a sharp fall in the revenue collection under GST.

But Thomas Isaac’s criticism did not go down well with the leaders like Bihar’s deputy chief minister Sushil Modi.

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“Low GST collection is not because of slashing of rates, but cyclical slowdown in auto & some other sectors are major contributors. Most rate cuts were in 2018 but from Nov 18 to March 19 growth of revenue was 14%. Kerala party to every rate cut,” said Sushil Modi in a tweet.

In fact, the problem of revenue collection under the GST was not new. The Centre’s own estimate of buoyancy in the GST collection for FY 2018-19 was way off the mark.

The Union government’s own GST collection fell short by over Rs 1 lakh crore of the budget estimates for FY 2018-19. As per the latest data given in this year’s budget, the Centre’s GST collection was estimated to be Rs 6.44 lakh crore in the revised estimates as against the budget estimate of Rs 7.44 lakh crore for the fiscal.

“You do some fine tuning that’s it. But because of the savage rate cuts, the end result is that you have serious drop in revenue collection. Revenue does not keep up with any estimation,” Thomas Isaac told Financial Express Online.

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But the sharp drop in September stoked the concerns that the situation may not improve anytime soon. Perhaps, it was this belated realisation because of which the GST council, the apex body comprising both the Centre and states, did not agree to a rate cut in its last meeting held in Goa this month despite frantic calls from several sectors such as automobile, cement manufacturers and real estate developers.

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First published on: 04-10-2019 at 18:27 IST