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Rs 40,000 Crore GST shortfall expected: Government

In the Month of August, the GST collection was dropped below Rs 1 lakh crore and recorded to Rs 98,202 crore.

Read More: Again drop in GST collections, recorded below Rs 1 lakh crore in August

Moreover, the government is expecting a shortfall of around Rs. 40,000 crores in the GST collections against what has been budgeted for 2019-20.

The Centre has informed the GST council in the recent meeting held in Goa on 20th September about the expected shortfall in GST collections due to the economic slowdown.

Latest data revealed that GDP growth touched to a six-year low of 5% in the April-June quarter, resulting in the loss of revenues.

Such a huge shortfall could put pressure on the compensation that states are eligible for in case the tax growth falls below 14% during the year. As part of the GST bargain, the Centre had agreed to compensate states for five years, if the annual increase in revenues was less than 14%.

However, states were optimistic that the government will find a way to meet the compensation requirements; otherwise, they may be forced to choose for an alternative of borrowing from the market.

The Centre has estimated a collection of Rs 1 lakh crore cess on sin and luxury goods in 2019-20 or about Rs 8,000 crore a month. In the first four months of the year, the Centre has released Rs 45,784 crore as compensation to states.

It was also demanded by the states that the compensation period should be extended by another three years. The government has said it expects revenues to rebound when growth picks up in the coming quarters and is hopeful of robust GST collection.

It is also working on measures to plug loopholes and stamp out fraud claims.

Author: Niranjan Reddy

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