GST inhibits State’s tax revenue growth

Five months after the rollout of the Goods and Services Tax across the country, it is now clearly emerging that the momentum of States with impressive revenue growth rates has slowed down.

Telangana with the highest growth rate in the country has registered less than 14% growth rate in certain components under the GST — in the State GST and the Integrated Goods and Service Tax (IGST) compared to earlier tax regime and the Centre had to compensate under the GST Act.

State received a compensation of ₹7 crore in the first two months — July and August — and ₹162 crore for September and October. The overall growth rate was more than 14% , thanks to the impressive growth in VAT on petroleum products and liquor, which are outside the GST purview. But the revenue from some goods and services that were brought under the GST was below 14%.

Sources said that the growth could have been at least 3% to 4% higher without GST regime and the compensation given by the Centre was no consolation as the State had lost significant revenue due to slow down of growth rate.

Centre feels it

Centre too had seen its total GST revenue collection coming down from ₹90,000 crore to ₹80,000 crore in November, confirming a nation-wide trend of fall in revenues post GST.

Better performing States like Maharashtra, Karnataka, Tamil Nadu and Telangana were impacted by the GST while States like Bihar, Uttar Pradesh with only 5% to 6% of growth benefited and got greater compensation as the GST Act protected the revenues of the State if their growth rate was below 14 %.

There are many reasons for the fall in the GST revenue in November, sources say. Centre reducing the GST rates on many goods, extension of last date for filing of GST returns and increase in the turnover limit were some of the factors.

There is a view that the fall due to cut in GST rates is a temporary phenomenon and it will spur greater business volume and generate more revenues in the long run. But for how long one has to wait for the rate of growth of tax revenues to bounce back is the question.

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Printable version | Apr 21, 2021 3:55:59 PM | https://www.thehindu.com/news/cities/Hyderabad/gst-inhibits-states-tax-revenue-growth/article21382029.ece

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