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It’s Time to Fairly Distribute GST Proceeds Between Central and State Government..!!


  • On 38th GST Council Meeting , Central government going to form Group of ministers (GOM) which is going to be chaired by Union Finance Minister Nirmala Sitharaman and members from Bihar , Delhi , Punducherry , Tamil Nadu , Punjab , Odisa and Chattisgarh.
  • This GOM is formed to resolve matter with respect to delay in compensation of GST proceeds to state ministry.
  • GOM is going to examine the amount of undistributed IGST as allowed by the legal provisions and the actions will be taken after that.
  • The GOM will consider whether the amount will be transferred at or below the recommended 42% . The actual transfer to state , at present is 36% , as the central collection exclude Surcharge and Cess.
  • State is afraid lower rate transfer will affect their spending power . It will be difficult for them to discharge their responsibilities.
  • State ministry said State constitute of about 58% of the government expenditure , thus , Central ministry should release the money even if Central ministry has to borrow more money .
  • The amount of transfer depend on the Assumptions to be made for GDP growth , Revenue and expenditure projections for the next fiscal. GDP growth rate was 6.10% in the July-September quarter , which was almost half of the projected growth,thus,projection would be tricky.
  • State further demand extension of 2022 deadline , for the compensation to make revenue generating projects.
  • Where Finance Ministry look at the projection of revenue and expenditure , GST council look out issues such as Rates , Exemptions , Changes and Implementation of Indirect Tax. Thus ,it is necessary to have co-ordination between GST Council and Finance Commission.
  • States suggested to bring Petroleum products , natural gas , electricity under GST and suggested central to focus on systematic reform of tax.
  • With not much confusion , only two GST rate will simplify tax structure. The Reverse Charge Mechanism can be extended to all large tax payers , so that small supplier will have work of filing returns only.
  • GST could be a good move with stable and simplified tax structure.


Author: Niranjan Reddy

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