PANAJI: The State Government fears that it could face an additional revenue shortfall up to ₹200 crore on account of the reduction in Goods and Services Tax on restaurants which comes into effect from November 15.
As per the decision taken in a meeting of the GST council held on November 10, tax on eating at restaurants across the board was brought down to 5% GST on both AC and non AC restaurants as well as on restaurants within hotels.
Goa being a consumer state with tax on restaurants being one of the major contributors to the state revenue collections. Before the GST regime was brought into force, VAT on restaurants was levied to the tune of 12.5% while with the recent reduction to 5% the state component at GST will stand at 2.5% with the other 2.5% being the central government's component. Effectively the state government's share is being reduced by 10% from the pre-GST regime.
For the last financial year, the state government earned a VAT on food of ₹189-crore. Had the VAT regime continued into this financial year, the state would have received ₹215-crore on account of growth in the industry. However at the current rate of 2.5% being the state component of GST the state is projected to earn only ₹43-crore from revenue on food a shortfall of nearly ₹200 crore.
To add salt to the state's wounds, the rates of various dishes are not expected to significantly be reduced with most restaurateurs, unwilling to pass on the benefit to consumers. This comes despite several restaurateurs having bumped up their rates no sooner the GST regime came into force.
The Central Government will compensate the State Government for revenue shortfalls in the initial period of GST implementation, but revenue officials are worried that the shortfall isn't likely to abate anytime soon and worse, makes the State even more dependent on the central government, which in turn will eat into the federal structure of the Indian Union.
Back in August, Chief Minister Manohar Parrikar had admitted that the state had "not managed to collect GST which is equivalent to VAT."
Initially Parrikar had boasted that Goa would not need any compensation from the Central Government once the GST is implemented and had said that Goa would instead have revenue surplus. However, during the first quarter of GST implementation Goa received ₹68-crore as on date as compensation from the central government due to revenue shortfall and sought a further ₹40-crore more.
As the tax collections after the roll-out of Goods-and-Services-Tax (GST) are not increasing enough, the central government is likely to further compensation to the Goa government to the tune of ₹85 crore.
"We expect to receive ₹85 crore from the central government as compensation for tax collections for the two months of September and October. It is likely that we will get this amount by the end of November 2016," Dipak Bandekar the Commissioner of Commercial Taxes said.
The earlier ₹68-crore was given for the period of July and August.
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THEN AND NOW
* Before the GST regime was brought into force, VAT on restaurants was levied at 12.5%
* With the recent reduction to 5% the state component at GST will stand at 2.5%
* Effectively, state government's share is being reduced by 10% from the pre-GST regime
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