Chandigarh, June 28: States ruled by opposition parties have demanded that either the revenue sharing formula under the GST regime should be changed or the compensation period should be extended by five years amid concerns over revenue deficit. The Goods and Services Tax (GST) was introduced on July 1, 2017, and states were assured compensation for revenue loss by June 2022 due to the GST rollout.
As the GST Council began here on Tuesday, states also cited a recent Supreme Court ruling that decisions made by the council are not binding and states need not stick to them. The court’s decision has been viewed by some states as having the power to determine taxation.
Chhattisgarh Finance Minister TS Singh Deo said the existing formula of equally dividing the revenue from GST between the Center and the states should be changed, with the states giving a bigger share of 70-80 per cent. Kerala Finance Minister KN Balagopal said that the GST compensation mechanism should be expanded for the states to meet the revenue loss.
“Almost all the states are demanding extension of the compensation period,” Balagopal said. In a letter to Union Finance Minister Nirmala Sitharaman, who is chairing the GST Council meeting here, Dev said her state has suffered huge revenue losses under the GST regime, mainly because mining and manufacturing states have been hit the most under the GST. There has been more damage, which is a consumption-based tax.” We are moving the proposal in the GST Council to continue with the 14 per cent protected revenue provision. If the protective revenue provision is not continued, the 50 per cent formula for CGST and SGST should be changed to 80 -70 per cent SGST and 20-30 per cent for CGST,” said Dev, who was attending the meeting due to COVID-19. are unable. -19 infection.
Otherwise, the current compensation mechanism, he said, should continue for the next five years. At present, the revenue collected from GST is shared equally between the Center and the states. The collection from the cess levied on luxury, demerit and sin items is used solely to compensate the states for revenue loss due to GST implementation.
The two-day GST Council meeting, which is currently underway in Chandigarh, is set to discuss the compensation mechanism after a period of five years, which was decided at the time of GST rollout. While states’ protected revenues are growing at a 14 per cent compounding growth, cess collections have not grown in the same proportion, and COVID-19 has further widened the gap between protected revenues and actual revenue receipts, including a reduction in cess collections.
To meet the resource gap of states due to low release of compensation, the Center has earmarked Rs 1.1 lakh crore in 2020-21 and Rs 1.59 lakh crore in 2021-22 to meet a part as back-to-back loans. borrowed for Reduction in Cess Collection As per revenue growth data collected for Council meeting, only five out of 31 states/UTs Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim have protected revenue rate for states under GST in the financial year. Recorded higher revenue growth. 2021-22.
Puducherry, Punjab, Uttarakhand and Himachal Pradesh have recorded the highest revenue gap between protected revenue and gross state GST revenue after settlement in 2021-22. According to a Reserve Bank study, the weighted average tax rate under GST has come down from 14.4 per cent at the time of its launch to 11.6 per cent in September 2019. In a letter to Sitharaman, Dev said Chhattisgarh has suffered a loss of revenue. Rs 4,127 crore in the last financial year, Rs 3,620 crore in 2020-21, Rs 3,176 crore in 2019-20 and Rs 2,786 crore in 2018-19.
The most pertinent issue being brought to his attention is the abolition of the provision of 14 per cent protected revenue on June 30. It requested an extension of five years to protect the states from severe revenue loss and make them act as an effective federal government. India’s unit, Dev tweeted. Recalling the recent judgment of the Supreme Court regarding the power of the GST Council, Dev said: As long as we in the GST Council as its members unilaterally provide financial support for each State and Union Territory through rational revenue collection. do not ensure stability. India Then the concept for which the GST Council was created may seem unforgivable.
Separately, Amit Mitra, principal chief advisor to West Bengal Chief Minister Mamata Banerjee, said all decisions of the council should be taken by consensus in the light of the recent Supreme Court verdict. “Following the Hon’ble Apex Court judgment, it has become imperative for the GST Council to take every decision unanimously and remove any shadow of majoritarianism not only for the future credibility of the GST Council but also for maintaining its rich tradition. Leave it too. August body,” wrote Mitra, former finance minister of West Bengal. The Supreme Court had ruled in the Mohit Minerals Ocean Freight case that the recommendations of the GST Council are not binding and are of persuasive value only. It was recognized that Parliament and state legislatures can legislate on GST equally.
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