Slow Down In Economy

Slow Down In Economy

The Centre grapples with lower GST collections, a fresh tension now engulfs the Union Finance Minister-chaired GST Council with a certain section questioning the assumption of a 14 per cent “high” revenue growth rate covered by a Compensation mechanism mentioned in the Goods and Services Tax (Compensation to States) Act.With inflation hovering Around 4-5 per cent and India’s growth expected to be 5-6 per cent, it will be difficult for the Union government to provide Compensation to states at 14 per cent annualised rate,” a Finance Minister.

With an increase in GST rate ruled out for now, the focus has shifted to the actual growth rate of taxes collected by states, But subsumed under GST since July 2017. This is significantly lower than the 14 per cent growth rate assumed over the 2015-16 base year while committing compensation.Including the special category states, the all-India average tax growth Had worked out to 10.6 per cent in the three years preceding 2015-16.

The Centre has estimated Rs 1.09 lakh crore as compensation cess in the Budget for the current financial year. Cess Collection till November was Rs 64,528 crore. Extrapolated for the full financial year, it is expected to yield Rs 96,792 crore, Which will still leave a shortfall of Rs 59,208 crore.GST revenues have been declining over the last few months raising Concerns for both states and Centre. Barring November, GST collections contracted for previous two months, which even Led to delayed compensation payments to states. Even though officers committee recommended a rate hike for revenue Augmentation, the GST Council in its latest meeting decided against a rate hike as a knee-jerk reaction but instead focus On plugging leakages and curb tax evasion.