Gujarat's economic growth impressive but GST remains a challenge: Finance Commission

Gujarat's overall economic development is impressive, but Goods and Services Tax (GST) remains one of the big challenges, said N.K. Singh, Chairman of the visiting Finance Commission in Ahmedabad.

The Commission was particularly impressed with the reduction of its debt to GDP Ratio close to 20% (to be achieved by 2023-24) as stipulated by new Fiscal Responsibility and Budget Management Act (FRBM) and its Fiscal Deficit well below 3% benchmark.

Singh added that Gujarat's capital expenditure has been rising and it is in full compliance in key economic parameters which contribute to long-term healthy economic growth.

He said one of the biggest challenges which Gujarat is facing is GST collections. Once the 14% guarantee as GST compensation by the Union government winds up, Gujarat will need to look at the GST collection projections seriously and tax buoyancy may become an issue.

Though almost all the powers have been delegated to Urban Local Bodies and their accounts are in order, working of State Finance Commission needs to become more orderly and in conformity with Article 280 of the Constitution.

State urges an increase of devolution to over 50%, expansion of Net Divisible pool, suggests an alternative formula for devolution based on Urbanisation and Social Deprivation.

Meanwhile, Chief Minister Vijay Rupani highlighted the significant progress made in social sector with multiple government interventions and government's commitment to overcome certain challenges remaining in child malnutrition and secondary sector education.

He emphasised that the state's focus on developing infrastructure despite natural disadvantages. He also urged the commission to encourage the policy of Prohibition as adopted by the state by giving some incentive considering its positive externalities.

State government officials, on the other hand, urged on enhanced devolution by expanding the net divisible pool to remove the imbalance between revenue and expenditure responsibilities of the states, in general.

They also urged the Commission to replace the revenue deficit grants with performance grant which needs fine tuning of the performance criteria. They also highlighted the issues related to Centrally Sponsored Schemes.

15th Finance Commission also sought views of the leaders from various political parties.

Representatives of local bodies were requested to give some grant for backward areas in addition to performance grants, infrastructure development. They also urged to give basic grants to the local bodies without any stringent conditions which sometimes become difficult to fulfil due to some technical reasons.