States' GST revenue shortfall may be lower by up to Rs 40,000 cr this FY

The GST revenue shortfall faced by states is likely to reduce by about Rs 40,000 crore in the current fiscal on improved collections over the past four months, an official said.

The sharp decline in GST collections was estimated to lead to Rs 1.80 lakh crore shortfall in GST revenues of states. This includes Rs 1.10 lakh crore revenue loss on account of GST implementation and Rs 70,000 crore on account of COVID-19 pandemic.

The centre had set up a special window to borrow funds and pass on to the states for meeting the Rs 1.10 lakh crore GST revenue loss.

The official said that improved goods and services tax (GST) collections could bring down the total shortfall amount to around Rs 1.40 lakh crore.

We have done some calculations which show that the shortfall could be lower by about Rs 30,000-40,000 crore in the current fiscal, the official told PTI.

The official further said that Rs 1.10 lakh crore would be borrowed through the special window as planned and higher mop-up would be utilised to compensate for the loss of revenue due to COVID-19.

The centre has already borrowed and releases to the states Rs 1 lakh crore under the special window.

The official further said that for next fiscal beginning April 1, the GST council will decide on the mechanism for compensating states in its upcoming meeting in March.

The revenue loss next fiscal would be much less compared to this fiscal. However, meeting the 14 per cent revenue growth would be difficult, the official added.

Under GST law, states were guaranteed to be compensated bi-monthly for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

GST collections, which directly reflect the state of economic activity, had plummeted to a record low of Rs 32,172 crore in April 2020, after the government imposed a nationwide lockdown to curb the spread of coronavirus.

Since then, collections started picking up; and the four straight months of October to January recorded over Rs 1 lakh crore mop-up. The revenues in January are at record high of Rs 1.20 lakh crore.