Business

NIPFP pegs best-case GST revenue gap at ₹1.95 lakh crore


Institute says shortfall may go up to ₹2.45 lakh cr., exceeding Council’s forecast

The revenue shortfall for the Goods and Services Tax (GST) compensation payable to States in 2020-21 could be about ₹1.95 lakh crore in the best-case scenario, significantly lower than the ₹2.35 lakh crore estimated by the GST Council, as per a new research paper by the National Institute for Public Finance and Policy (NIPFP).

In a paper titled ‘The Pandemic and GST Revenue: An Assessment for Union and States’, Sacchidananda Mukherjee, an associate professor at NIPFP, estimated that even in the worst-case scenario, the revenue shortfall for GST compensation to States won’t exceed ₹2.45 lakh crore. “Though the spread of COVID-19 is on an apparent decline in India, the economic impact of the pandemic is still evolving, as new waves of COVID-19 infection are striking locally. Any estimate on revenue impact, thus, may not be free from shortcoming and constraints. However, as GDP data of the last two quarters is now available, and as GST shows the brightest sign of recovery among all revenue streams, an attempt is made in this paper to project GST revenue for 2020-21,” it said. Using actual GST revenues between April and October this year and GST collection trends in the past 13 quarters since the indirect tax regime was introduced, different scenarios were extrapolated to estimate likely GST revenue overall, as well as State-wise collections. The maximum GST revenue gaps this year are expected for Goa, Punjab, Chhattisgarh, Kerala and Chhattisgarh, the exercise suggested.

“The revenue gap in State GST collections is expected to vary between ₹2.85 lakh crore and ₹3.27 lakh crore. GST compensation cess collection in FY21 is expected to vary between ₹82,242 crore and ₹90,386 crore. Therefore, shortfall in GST compensation fund is expected to vary between ₹1.95 lakh crore to ₹2.45 lakh crore,” the paper concluded.

The NIPFP is an autonomous research institute, and was set up as a joint initiative of the Ministry of Finance and the erstwhile Planning Commission, with several State governments, and assists the Central, State and local governments in formulating public policies.

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