Change in GST sharing formula may deepen crisis

Change in GST sharing formula may deepen crisis

The Central government move to alter the Goods and Services Tax (GST) compensation-sharing formula citing a fall in tax collection will intensify the State’s fiscal crisis and seriously impact the relief and welfare initiatives being taken up to ease the COVID-19 crisis. 

The State government has already implemented a slew of welfare measures, including distribution of kits of essentials, free ration and health-care amenities, as part of the pandemic.

Finance Minister T.M. Thomas Isaac reiterated that the government would only increase the spending in health sector in view of the present crisis. 

Also Read: CBIC issued Revised Format/Schema for E-Invoicing in Form GST INV-01

The government has distributed welfare pensions in advance and is gearing up to distribute Onam kits and welfare pensions to address the cash crunch faced by indigent sections. All these would incur additional burden and the only opti on left is rationalisation of expenditure, which is set to be taken up soon.

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Finance Department sources told The Hindu that the State was banking on a protected revenue of ₹2,600 crore as compensation to make up for the revenue shortfall while preparing the budget. The present move to alter the formula would derail the budget itself. 

The tax collection in May was about ₹900 crore and as per the present indications it is unlikely to pick up in the months ahead. Even the Onam season may not revive business activity.

The returns from sale of diesel and petrol, stamp duty, motor vehicle registration and sale of Indian made foreign liquor which were expected to register a 10-15% growth compared to the previous year, too are unlikely to grow in the months ahead. 

The States will have to take up their case for compensation at the GST Council meeting. But if it failed to evoke positive response, the other option was to seek legal recourse and Kerala may have to take the lead in mobilising States, sources said.

Source: The Hindu

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