State on edge to make up Rs 1000 cr revenue deficit

THE GOAN NETWORK | MAY 23, 2022, 12:09 AM IST


With the central government expected to stop GST compensation for States from July, concerns have been raised on how the State government is expected make up for the massive tax revenue gap of Rs 1,000 crore.

“It is around Rs 1,000 crore deficit that Goa will face as the pre-GST regime taxes on food products, hotels, liquor, etc. have reduced due to implementation of GST,” said an official with the finance department.

Goa is dependent on tourism and prior to GST, there was luxury tax, entertainment tax, VAT on room rent and alcohol, casino entry tax, etc.

“As per corresponding figures last year, we were getting around Rs 1,000 crore as compensation”, the official said.

As the GST Act was implemented from 1 July 2017, the term of five years is ending on July 1, 2022.

“The State can ask for a central funded project of around Rs 1,000 crore against the compensation cess to make up for the deficit, as the deficit will directly affect the infrastructure development pace in the State,” the official added.

“It is unlikely that the central government will extend the compensation period. To get an additional fund of Rs 1,000 crore, the State can and has to push such a development project proposal with the Centre. Project-wise sanctions like hospitals, schools can be taken.”

The official admitted that as far as his knowledge is concerned, the State budget earlier had not taken into account the revenue deficit due to GST and stoppage of compensation.

“May be, they have assumed last year figures only to show buoyancy in the figures”, said the official.

Panchayats Minister Mauvin Godinho, who is a member of the GST Council and Group of Ministers (GoM), had stated that GST compensation for States would be discontinued for July.

“Have asked to find a solution for small States like Goa as big States have other areas of revenue. Goa is dependent on tourism as mining is stopped,” Godinho had said.

It may be noted from the earlier figures that Chhattisgarh, Goa, Gujarat, Himachal Pradesh, Karnataka, Punjab and Uttarakhand are the seven States whose dependence on Centre was 40 per cent and above in 2019-20.

As per statistics mentioned in the Economic Survey 2020-21, GST on restaurants was brought down to 5 per cent (of which 2.5 per cent is the State share), while earlier the State VAT was 12.5 per cent. As a result, the State had lost around Rs 189 crore in revenue.

The State is also losing around Rs 400 crore in revenue due to a closure of mining activity.

It may be noted that states like Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have revenue gaps due to GST.

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