Sushil Modi to head committee to look into GST revenue shortfall faced by states

The Deputy Chief Minister of Bihar, Sushil Modi will be heading the seven-member group of ministers (GoM) that will look into revenue shortfall being faced by the states after the GST roll-out and suggest steps for augmenting collections.

The GST Council, headed by Finance Minister Arun Jaitley and comprising state ministers, had on December 22, 2018, decided to set up the group of ministers to analyse reasons for the shortfall in revenue collections by the states since July 2017.

Key Role

• As per terms of reference (ToR) of the GoM, the seven-member committee will undertake data analysis using econometric and statistical tools and suggest suitable measures and policy intervention for course correction for revenue augmentation, particularly for the states suffering high revenue shortfall.

• The committee would also take into account trends of revenue collection before and after implementation of goods and services tax (GST).

• It would also look into structural patterns of major sectors of the economy impacting revenue collection, including the services sector.

• It would also identify the reasons for deviation in revenue collection trends and compare it with original assumptions worked out at the time of design and implementation of GST.

Background

Among the Indian states, only Andhra Pradesh and five northeastern states including Mizoram, Andhra Pradesh, Manipur, Sikkim and Nagaland recorded a revenue increase post the roll out of goods and services tax (GST).

Remaining others including Punjab, Himachal Pradesh, Chattisgarh, Uttarakhand, Jammu and Kashmir, Odisha, Goa, Bihar, Gujarat and Delhi faced a revenue shortfall following the implementation of the tax. These states faced revenue shortfall in the range of 14-37 per cent in the April-November period.

Among the union territories, Puducherry faced the maximum revenue shortfall of 43 per cent.

The central government has released Rs 48,202 crore as GST compensation to the states during April-November 2018, higher than the Rs 48,178 crore paid in the previous financial year.

The GST was rolled out on July 1, 2017. As per the GST law, the centre compensates states to ensure that their revenue is protected at the level of 14 per cent over the base year tax collection in 2015-16.

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