As the Centre grapples with lower GST collections, a fresh tension now engulfs the Union Finance Minister-chaired GST Council with a certain section questioning the assumption of a 14 per cent "high" revenue growth rate covered by a compensation mechanism mentioned in the Goods and Services Tax (Compensation to States) Act.
"With inflation hovering around 4-5 per cent and India's growth expected to be 5-6 per cent, it will be difficult for the Union government to provide compensation to states at 14 per cent annualised rate," a Finance Minister of a BJP-ruled state told The Indian Express.
With an increase in GST rate ruled out for now, the focus has shifted to the actual growth rate of taxes collected by states, but subsumed under GST since July 2017. In the three years preceding 2015-16, the growth rate in taxes for non-special category states was just 8.9 per cent. This is significantly lower than the 14 per cent growth rate assumed over the 2015-16 base year while committing compensation.
Including the special category states, the all-India average tax growth had worked out to 10.6 per cent in the three years preceding 2015-16.
According to data available with the GST Council, the average revenue to be protected for states in 2018-19 stood at about Rs 49,020 crore a month. The average monthly collection for states was lower at Rs 43,166 crore. This meant, the Centre made good the gap of almost Rs 6,000 crore a month, or Rs 72,000 crore a year.
(With inputs from The Indian Express)