GST shortfall in FY19: Some states needed about 50% aid, others just 10%

By: |
September 25, 2020 4:10 AM

State GST (S-GST) collections in the last fiscal were about Rs 5.17 lakh crore or Rs 1.65 lakh crore less than what the constitutionally guaranteed 14% compounded annual growth would require.

While the deficit of many states was in line with the national average, some managed to earn nearly 90% of protected revenue, while others resorted to compensation for nearly half of the protected revenue.While the deficit of many states was in line with the national average, some managed to earn nearly 90% of protected revenue, while others resorted to compensation for nearly half of the protected revenue.

The compensation requirement for all states combined was nearly a quarter of their protected revenue under Goods and Services Tax (GST) in 2019-20, according to official data.

While the deficit of many states was in line with the national average, some managed to earn nearly 90% of protected revenue, while others resorted to compensation for nearly half of the protected revenue.

State GST (S-GST) collections in the last fiscal were about Rs 5.17 lakh crore or Rs 1.65 lakh crore less than what the constitutionally guaranteed 14% compounded annual growth would require. While the compensation cess collection was only about Rs 96,000 crore for the year, the remaining shortage was made up from unutilised fund from previous years and also from states’ share of integrated GST that had gone to Centre due to lack of apportioning mechanism in the first few months after GST’s July 2017 launch.

Among the states, Punjab struggled the most as it could collect just over 52% of its protected revenue through S-GST. This was followed by Uttarakhand, Karnataka, Delhi and Gujarat but the latter three were close to the baseline deficit for all states together which was at 24%.

On the other side, Andhra Pradesh, Assam and Telangana seemed to have cracked the GST code as their S-GST mop was nearly 90%, requiring only 11.3%, 12.8% and 13% respectively as compensation payment.

This was followed by Uttar Pradesh, West Bengal and Maharashtra.

With compensation requirement in the current fiscal to be much higher partly due to the pandemic, the central government has proposed borrowing from the market by the states themselves to ensure states’ revenue is protected. The protected revenue for the states in FY21 stands at Rs 63,700 crore/month. The total shortfall for all states this year after taking into account the estimated cess proceeds is estimated at Rs 2.35 lakh crore.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1FM Nirmala Sitharaman: Govt has started assessing Covid’s impact on economy
2Asian Development Bank to provide USD 346 million loan for power supply project in rural Maharashtra
3IMF says nearly all Mideast economies hit by coronavirus pandemic recession