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GST compensation payment to 9 states may double to Rs 70K-cr in FY20: ICRA

Subdued economic growth and reductions in GST rates have resulted in a muted 3.7 per cent rise in the headline GST collections in April-November 2019

Press Trust of India  |  New Delhi 


payment of nine select states, including Gujarat, Maharashtra and Kerala, is expected to double to Rs 60,000-70,000 crore in 2019-20, according to a report.

The timing of release of such grants by the Government of India (GoI) to these states would critically affect their cash flows, said in a report.

The states are Karnataka, Kerala, Gujarat, Maharashtra, Punjab, Haryana, Rajasthan, Tamil Nadu and West Bengal, the report said.

also expressed apprehension that "the central tax devolution (CTD) to these states in 2019-20 could be Rs 595-770 billion (Rs 59,500-77,000 crore) lower than what the GoI has budgeted, which has emerged as a key revenue risk for the states in this fiscal."

Accordingly, a reduction in capital expenditure below the budgeted level appears imminent in the current fiscal.

Subdued economic growth and reductions in GST rates have resulted in a muted 3.7 per cent rise in the headline GST collections in April-November 2019.

expects the actual SGST collections in the current fiscal to be considerably lower than the level of revenues protected under the GST (Compensation to States) Act, 2017, which is calculated based on a 14 per cent annual growth rate on the base year (FY2016) revenues subsumed into the GST.

This would necessitate a significant rise in the grants required by the states from the Centre, it said.

The CTD to all the 29 states has recorded a YoY contraction of 2.7 per cent in April-October 2019, it said, adding, this is likely to reflect a portion of the adjustment for the higher-than-warranted devolution that was made by the GoI to the states in FY2019.

"The CTD to the states in FY2019 was presumably based on the GoI's FY2019 Revised Estimates (RE) of gross tax revenues of Rs 22.5 trillion. However, the provisional data for FY2019 had pegged the GoI's gross tax revenues at Rs 20.8 trillion, Rs 1.7 trillion lower than the RE for that year," it said.

Accordingly, the tax devolution to all the 29 states was higher than mandated by Rs 0.6-0.7 trillion, it said.

Additionally, the report expects the GoI's actual gross tax revenues to trail the FY2020 revised budget estimates (RBE) of Rs 24.6 trillion by a considerable Rs 3.0-3.5 trillion.

"After factoring in the shortfalls in gross tax collections in FY2019 and the estimated gap in FY2020, the aggregate CTD to all the Indian states may be as much as Rs 1.7-2.2 trillion lower in the current year than what was budgeted by the GoI," it said.

Based on the combined inter-se share in Central taxes of the nine states of 35.3 per cent, it estimates the shortfall in CTD to these states in the range of Rs 595-770 billion in FY2020, posing a key revenue risk in the current fiscal.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, December 19 2019. 16:50 IST