Goods and Services Tax (GST) ,details of reasons for revenue shortfall

212. MS. S. JOTHIMANI:
GST Shortfall

Will the Minister of FINANCE be pleased to state:
(a) the details of reasons for revenue shortfall in the Goods and Services Tax (GST);

(b) the details of options available to the States like Tamil Nadu to meet the revenue shortfall in GST collections and the objections from the States for the options;

(c) the measures which have been taken by the Government for fulfilling its moral and legal obligation to pay the compensation for the shortfall in GST collections to the States;

(d) the State-wise details of amounts disbursed under GST compensation as of date;

(e) whether the GST cess will be extended beyond 2022 and if so, the reasons therefor; and

(f) the details of decline in GST revenue, State-wise including Tamil Nadu and the reasons therefor?

(a) & (f) Total net GST target (for centre, as per receipt budget document) has been pegged at Rs. 6,90,500 crore for 2020-21 in the general Union Budget, 2020-21. The actual net GST collection for the centre till August, 2020 is Rs. 1,81,050 crore, which shows 26.2% achievement (till August, 2020) of BE 2020-21 (the details enclosed at annexure-I).

The BE estimates for FY 2020-21 of GST in the Union Budget, 2020-21 were projected on the basis of assumption of higher growth of GDP, however as per CSO, MoS&PI press release [on 31st August, 2020], the Nominal GDP for Q1 (April-June), 2020-21 shows a contraction of 22.6% which is one of the major reason for revenue shortfall in GST. Other reasons for low tax collection inter-alia include nationwide lockdown measures implemented since March 2020 consequent to global Covid-19 pandemic which led to limited economic activities, extension of GST return filings timelines without payment of interest, late fee or penalty etc.

(b) & (c): As per provisions in Section 7 of the GST (Compensation to States) Act, 2017 loss of revenue to the States shall be calculated and released at the end of every two months’ period, for 5 years. Accordingly, admissible GST compensation for the period April, 2019 to March, 2020 has been released to all States/ UTs including Tamil Nadu. Due to short GST Compensation Cess collection in the current financial year, GST compensation is yet to be paid for the period April-July, 2020.

Accordingly, issue of pending GST compensation and future course of action to meet the GST compensation shortfall has been discussed in 41st GST Council meeting on 27.08.2020 wherein States were given two options to meet their GST compensation shortfall for current FY from market borrowing. It was also decided that States will give their preference views thereon. Thereafter on finalization of scheme, the states can choose either Option 1 or Option 2 and accordingly, their compensation, borrowing, repayment etc. will be dealt as per their individual choice. The Chief Minister of Tamil Nadu vide his letter dated 31.8.2020 had requested the Hon’ble Prime Minister that Government of India can raise the required funds as a loan and lends it to the GST compensation fund against future cess receipts, so that the GST compensation can be paid in full to the States in 2020-21.

(d) State wise detail of GST compensation disbursed is as per Annexure II.

(e) Section 18 of Constitution (One Hundred and First Amendment) Act, 2016 provides for payment of GST compensation to the states, on the recommendation of the GST Council, for loss of revenue arising on account of implementation of GST for a period of five years.

(f) The details of decline in GST revenue (domestic) State-wise are as per Annexure-III

ANNEXURE I

GST Collection since inception

Tax Head	2017-18		2018-19		2019-20		2020-21
	Revised Estimate (RE)	Actual	Revised Estimate (RE)	Actual	Revised Estimate (RE)	Actual	Budget Estimate (BE)	Actual[April- August] (Provisional)
CGST	221400	203261	503900	457534	514000	494070	580000	125308
IGST	161900	176688	50000	28945	–	9204	–	27580
GST Compensation Cess	61331	62612	90000	95081	98327	95551	110500	28163
Net Collection	444631	442561	643900	581559	612327	598825	690500	181051

Source: Receipts Budget, PrCCA, CBIC

Annexure II
Details of GST Compensation
(Rs. in crore)

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Annexure III

GST revenue, State-wise April-Aug 2020-21 YoY

Source -lok sabha