The Centre’s Goods and Services Tax collection for the month of August came in at Rs 86,449 crore, the Ministry of Finance said in a press release on Tuesday. This is slightly lower than the Rs 87,422 crore it had collected in July. The highest GST in August was collected from Maharashtra, at Rs 13,407 crore.
However, the figures represent a substantial fall in the government’s revenue from the same period last year because of sluggish economic activity due to the coronavirus pandemic. The GST collection in August this year was 88% of that in August 2019.
“During the month, the revenues from import of goods were 77% and the revenues from domestic transaction (including import of services) were 92% of the revenues from these sources during the same month last year,” the Ministry of Finance said. “It may also be noted that the taxpayers with turnover less than Rs 5 crore continue to enjoy relaxation in filing of returns till September.”
Out of the gross revenue of Rs 86,449 crore in August, the Central GST collected is Rs 15,906 crore, State GST Rs 21,064 crore, Integrated GST is Rs 42,264 crore and cess is Rs 7,215 crore, the finance ministry said.
“The total revenue earned by the Central Government and the state governments after regular settlement in the month of August, 2020 is Rs 34,122 crore for CGST and Rs 35,714 crore for the SGST,” it said.
CMs write to Centre against borrowing to meet deficit
Five chief ministers have written to the Centre against its request to all states to borrow funds to meet the compensation deficit under GST. Telangana Chief Minister K Chandrasekhar Rao, Delhi CM Arvind Kejriwal, Tamil Nadu’s Edappadi K Palaniswami and West Bengal’s Mamata Banerjee have written to Prime Minister Narendra Modi, while Chhattisgarh Chief Minister Bhupesh Baghel has written to Minister of Finance Nirmala Sitharaman.
On August 29, the Union Ministry of Finance put forth two options before states to meet the shortfall of of Rs 2.35 lakh crore in GST compensation for 2020-’21. The first option is that the states may borrow the full compensation deficit of Rs 2.35 lakh crore via a special window in consultation with the RBI. The second option entailed borrowing the entire projected shortfall of Rs 2.35 lakh crore this year, facilitated by the central bank.
The Kerala government rejected both options on August 30. Like Chhattisgarh, Kerala asked the Centre to take a loan and clear the dues. “Kerala wants the Centre to take loan and provide GST compensation and this has the approval of the Chief Minister Pinarayi Vijayan and other ministers,” state Finance Minister Thomas Isaac said.
Isaac told The Indian Express on Tuesday: “Central borrowing is very simple, they can directly borrow from the markets…but if they are afraid that interest rates will rise and so on, monetise the debt. Simple. That’s what all the countries are doing.” The finance ministers of states may vote on the matter when it comes up for discussion in the next GST Council meeting on September 19.
Apart from Kerala, Punjab, West Bengal, Delhi, Chhattisgarh, Telangana, Rajasthan, Puducherry – all non-BJP rules states and Union Territories – rejected the Centre’s proposals in a meeting on Monday, The Indian Express reported.
In his letter to Modi, Rao said that while the states have been left with no major “buoyant taxes” of their own, the Centre still has buoyant options like income tax, corporation tax and customs duties. “The borrowings by the Centre as well as the states are from the same financial system and pool of investors and their impact on the macroeconomic situation is not very different,” Rao wrote. “Borrowings by the states will also push up the yield on government securities.”
Kejriwal wrote to Modi that the government should consider more legally viable and sustainable options, including the GST Council authorising the Centre to take loans on its behalf and extend the cess collection period from 2022.
Palaniswami said that both options offered by the Centre are “administratively difficult to implement and more expensive” for the states. “Whether the Government of India borrows or the state governments borrow, for rating agencies and others who monitor the macroeconomic indicators, it is the overall general government deficit that is relevant,” Palaniswami said. “The argument that states borrowing for what is essentially a Government of India obligation is a seemingly better optical arrangement does not appear to be a strong or valid reason.”
West Bengal Chief Minister Mamata Banerjee also wrote to the prime minister and urged Modi not to “allow an insufferable blow to the federalist polity of the nation” by depriving the states of the GST compensation, reported PTI.
“I am deeply anguished by the Goods and Services Tax imbroglio which tantamounts to a betrayal of the trust and moral responsibility of the Government of India towards the states, violating the very premise of federalism,” she wrote. “This is a travesty and an abrogation of the fundamental basis on which the states gave up 70 % of their taxing powers, including the entire VAT regime, to usher in the GST regime.”
She also said the Centre could raise resources to service its debts, whereas state governments “simply cannot service huge additional debts when their finances are on the verge of collapse”, according to NDTV.
“... in December 2013... sole reason why BJP was opposing GST implementation was because it did not trust then government of India in honouring GST compensation to states,” she added. “Today [these] words are ringing true in our ears as we are losing our trust in the BJP government at the Centre.”