Three laws passed in Parliament could boost central revenues, reshape GST cess flows, shift MGNREGA costs to states and create new budget headroom ahead of the 2026-2027 Union Budget, points out A K Bhattacharya.
Finance Minister Nirmala Sitharaman on Monday introduced two bills in the Lok Sabha to levy excise duty on tobacco and tobacco products, and a new cess on manufacturing of pan masala, which will replace the GST compensation cess on such sin goods.
The CAG has found that the Union government in the very first two years of the GST implementation wrongly retained Rs 47,272 crore of GST compensation cess that was meant to be used specifically to compensate states for loss of revenue.
The GST Council on Saturday postponed a decision on cutting tax rate on life and health insurance premiums, officials said. The 55th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state counterparts, decided that some more technicalities needed to be ironed out and tasked the GoM for further deliberations.
The GST Council, in its meeting on Saturday, is likely to decide on reducing tax rates on life and health insurance premiums, while hiking it on high-end wrist watches, shoes and apparels, besides considering a separate 35 per cent tax slab for sin goods. The 55th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state counterparts, is likely to discuss rate rejig in about 148 items, besides, it will also deliberate on bringing Aviation Turbine Fuel (ATF), a major component for airline industry's operation cost, in the Goods and Services Tax (GST) fold.
The Budget should use the extra RBI surplus to better effect, suggests A K Bhattacharya.
Finance ministry sources have countered CAG audit finding of central government wrongly retaining Rs 47,272 crore of GST compensation cess meant for states, saying temporary retention cannot be termed as diversion.
States are planning to pass resolutions in their legislative assemblies; however, such tactics will be used as the last resort if the Centre continues to stall allocations.
The finance ministry on Monday said it will transfer Rs 6,000 crore as the second tranche of GST compensation shortfall to 16 states and 3 Union Territories -- including Maharashtra, Bihar, Assam, Puducherry and Delhi. The Centre had on October 23 transferred Rs 6,000 crore to 16 states and 2 UTs of Delhi and Jammu and Kashmir. In the second tranche of transfer, Union Territory of Puducherry has been included.
GST collections in March slipped below the psychological Rs 1-lakh crore mark for the first time in four months to Rs 97,597 crore as the COVID-19 lockdown that shut most businesses compounded tax collections in an already sluggish economy.
From real estate to metals, what Sitharaman's Budget has in store.
The October 5 meeting assumes significance as the Centre and states are at loggerheads over the issue of funding Rs 2.35 lakh crore GST collection shortfall.
The cigarettes segment had a revenue of Rs 4,554.21 crore during the second quarter of the current fiscal, as against Rs 8,528.47 crore in the year-ago period, down 46.56 per cent.
The shortfall in GST compensation payable to states in the current fiscal is estimated at Rs 2.69 lakh crore, of which Rs 1.58 lakh crore would have to be borrowed this year. The Centre expects to collect over Rs 1.11 lakh crore through cess on luxury, demerit and sin goods which will be given to the states to compensate them for the shortfall in revenue arising out of GST implementation. The remaining Rs 1.58 lakh crore would have to be borrowed to meet the promised compensation to states under the Goods and Services Tax (GST) regime.
India's GST collection remained above Rs 1 lakh crore for the third month in a row at over Rs 1.17 lakh crore in September, raising expectations that second half of the year will post higher revenues. The tax collections in September on goods sold and services rendered was 23 per cent higher than Rs 95,480 crore collected in September 2020, and 27 per cent higher than Rs 91,916 crore collected in September 2019. The collection in September is the highest in five months since April, when revenue was at record high of Rs 1.41 lakh crore.
Under the GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017.
The shortfall in the Centre's GST collections has raised concerns over it meeting the fiscal deficit target of 3.3 per cent of GDP, reports Ishan Bakshi.
With the first quarter gross tax mop-up reaching Rs 5.6 lakh crore, Icra Ratings on Friday said the government is set to exceed the budgeted tax collection target of Rs 22.2 lakh crore for 2021-22, led by indirect taxes. The government has budgeted a modest 9.5 per cent growth in tax collections at Rs 22.2 lakh crore for FY22, over FY21 collections of Rs 20.2 lakh crore. However, despite the second wave of the pandemic, the April-June quarter tax collections rose to Rs 5.6 lakh crore, which is 39 per cent higher than Q1 of FY20.
Data released earlier by CAG shows capital expenditure by the Centre had contracted 9.2 per cent in Q2
In the current financial year, the Centre released nearly Rs 1 lakh crore compensation to the states till September.
The demand for extension of the GST cess regime among others was made by several state finance ministers at a pre-budget consultation called by Union Finance Minister Nirmala Sitharaman in New Delhi. Besides, many states also demanded raising the share of the Union government in the Centrally Sponsored Schemes (CSS). Currently, the central government and state government share in some CSS is 60:40 while in others it is 75:25.
The question on who should borrow from the market and whether the borrowing will be under two buckets should be decided by the GST Council, and not by the Centre. If there is no consensus, there has to be a vote, says A K Bhattacharya.
The mop-up could have been much higher, but tax on imports fell 2 per cent y-o-y.
The compensation would be met through levy of a cess called 'GST Compensation Cess' on luxury items and sin goods like tobacco, for the first five years.
The 14th Finance Commission had recommended that states' share in the divisible tax pool be raised to 42 per cent, from 32 per cent earlier.
Ahead of the first meeting of the top decision-making body in nearly eight months, finance ministers of eight states ruled by non-Bharatiya Janata Party and like-minded parties -- Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala and West Bengal -- have devised a joint strategy to press for a zero tax rate on Covid essentials, sources said.
The Central government will borrow up to Rs 1.1 lakh crore on behalf of the states to bridge the shortfall in GST collections, the finance ministry said on Thursday. A slowdown in the economy since last fiscal has resulted in a drop in the Goods and Services Tax (GST) collections, upsetting the budgets of states which had given up their right to levy local taxes such as sales tax or VAT when GST was introduced in July 2017. To make up for the shortfall, borrowing from the market was proposed.
If there is no third wave of the pandemic, the fiscal position of the Centre and the states will be much better than budgeted for FY22 and the states may garner Rs 60,000 crore more in tax collections at Rs 8.27 lakh crore this fiscal year than they have budgeted, a report said. The report by SBI Research on Monday bases its optimism on GST collection so far this fiscal, which has been the best ever in spite of the fact that the two months bore the maximum brunt of the second wave -- with April setting a record Rs 1.41 lakh crore and May collection a tad low at Rs 1.03 lakh crore. The report also said overall government finances do not look overstretched as GST collections have continued to maintain pace so far and the additional fiscal impact arising from free vaccination and more food supplies will only be around Rs 28,512 crore.
Call for fiscal autonomy to Union Territories with Assemblies may get louder with 'special status' to J&K in the Finance Commission, say experts.
Dissenting states including Chhattisgarh and Kerala, have made it clear they are in no mood to relent. They want the Centre to borrow the entire Rs 2.35 trillion this fiscal citing bleak fiscal position.
Experts said if the slowdown, and subsequent weakness in GST mobilisation, continued, it would curtail the Centre's resources to a considerable extent in the current financial year.
Retaining the GST rate assumes importance since states are under pressure to increase their revenues, hit hard by lockdown. Also, the Centre has not fully compensated states for their revenue losses on account of GST for 2019-20.
There are several welcome standalone reforms, but these do not add up to a coherent strategy to achieve a $5 trillion economy or secure Aatmanirbharta, observes Rathin Roy.
For the first eight months of the current financial year, the figure stood at Rs 7.17 trillion.
The Centre managed to collect only Rs 990 crore as compensation cess in April 2020-21, almost one-ninth of the figure of Rs 8,874 crore mopped up a year ago. The subdued collection would further increase states' problems unless the GST Council, which meets next week, decides to borrow from the market.
While Congress and the states ruled by non-NDA parties pushed for the Centre meeting its statutory obligation of covering the deficit, the Union government cited a legal opinion to say it had no such obligation if there was a shortfall in tax collections. The Centre as well as BJP-JD-U-ruled Bihar were of the opinion that the states should borrow to make up for the shortfall in the tax revenues that have been compounded by the COVID-19 crisis, sources said.
Experts have flagged issues regarding the levying of new cess/tax, especially those related to complications in administering the cess.
It is possible that the Centre has now become wiser and has decided to follow an allocation system which gives it more from Integrated GST and helps boost its revenues, says A K Bhattacharya.
After the 2019 election, one thing is sure: GST will see a number of changes, explains Indivjal Dhasmana.
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