West Bengal finance minister Amit Mitra on Thursday expressed concern over the decline in revenue collections under the GST for October, saying the shortfall in states’ revenues could far exceed the budgeted Rs 55,000 crore a year.
West Bengal finance minister Amit Mitra on Thursday expressed concern over the decline in revenue collections under the GST for October, saying the shortfall in states’ revenues could far exceed the budgeted Rs 55,000 crore a year. Jammu and Kashmir finance minister Haseeb Drabu, however, allayed fears of revenue crunch, saying that the accumulated integrated GST (IGST) stood at Rs 1.25 lakh crore which would eventually come to the states and the Centre. IGST is levied on inter-state transfer of goods and services but this collection is eventually utilised to pay for central and state GST liability. However, this happens only when the concerned item is sold to the final consumer. Mitra compared the September GST mop-up of Rs 95,000 crore with Rs 83,000 collected in October.
He also added that the states’ revenue shortfall in July-October had reached nearly Rs 39,000 crore, which could go up to Rs 85,000 crore in a full-year at the current rate. It is to be noted that Mitra has been a part of the GST Council which has taken all its decision unanimously so far. Bihar deputy CM Sushil Modi supported Drabu’s view saying similar concerns of revenue shortfall had plagued the implementation of VAT in 2005 but the states had seen their revenue increase in a span of two years after VAT replaced its predecessor. The states’ finance ministers were speaking at a session on GST organised by FICCI. Mitra said lack of preparedness on part of IT backbone of GST had adversely affected the small firms, which in turn had benefited large firms through elimination of competition.
He also decried the provision for arrests of tax defaulters under GST and exhorted the industry bodies to protest against it. Similarly, he was critical of GST’s anti-profiteering provision and said he had opposed it on grounds of being impractical.Drabu, however, said the GST Council was the first truly federal commission of the country as it provided much-needed freedom to states on taxation matters. He added that the most import aspect of the legislation was that GST would change the basic ethics of the doing business in the country while providing states with a virtual tax insurance policy for five years as it guarantees revenues at 14% growth y-o-y.
Additionally, reacting to Mitra’s comments on anti-profiteering provision, Modi defended the decision saying that it was important to ensure businesses passed on the benefits of reduced tax incidence to the consumers. Explaining the technical glitches faced by taxpayers in dealing with GST Network, he said implementing GST was a massive exercise and some teething issues were expected. Going forward, he said, simplification of the IT network to make it easier for users would be the top priority for the Council.