The Goods and Services Tax (GST) has completed two years and the Central and State tax departments have jointly celebrated the second anniversary on July 1 all over India.

During the first quarter of the year, GST collection has been on an average above Rs 1.04 lakh crore per month as against an average collection of Rs 98,114 crore per month during 2018-19, registering a growth rate of 6.32 per cent.

The GST Council had reduced tax rates in many goods and services before the general elections. In the 28 per cent category of goods only, out of 228, the Council reduced tax rates of 179 goods to 18 per cent or 12 per cent.

The tax rates had been fixed taking into account incidence of taxes in pre-GST regime and considering revenue neutrality. The growth rate of 6.32 per cent despite rate cuts is encouraging.

The GST being a destination based taxation system has benefitted most the States like Sikkim, Arunachal Pradesh, Nagaland, Manipur and Mizoram. The tax collections in these States are higher than their pre-GST collections and they are not getting any compensation.

These States depend on other States for their purchases, mostly on Kolkata or Guwahati. Prior to GST, CST was collected and the taxes were appropriated by the States where the goods were sold. But under the GST, the taxes collected on inter-State sale are transmitted to these States.

For the purpose of compensation, a notional cumulative annual growth rate of 14 per cent is applied to the base year collection of 2015-16 and the projected revenue for a year is determined.

 Actual collection of a year is deducted from the projected revenue to arrive at the compensation amount. The gap between the projected revenue and actual collection by the end of May, 2019 for Odisha is 27 per cent.

The gap for Punjab is 43 per cent, Chhatishgarh, 36 per cent and Himachal Pradesh, 41 per cent. These States are getting compensation. It is most unlikely that the gap can be made up by July 2022. Compensation is available for five years and the GST will complete five years in July 2022; then these States will land in soup.

Odisha incurs loss due to structural changes in the GST and for the State’s production and consumption pattern. Odisha used to get 24-25 per cent of its tax from mines and industry. Its industries are mainly mineral based. The minerals and industrial products are mostly sold to other States or exported.

The State used to get 5.5 per cent tax, both VAT and Entry Tax for internal consumption and 2 per cent CST for sale to outside the State, besides it retains the input tax above 2 per cent in case of inter-State transactions.

Under the GST, the State gets only 2.5 per cent on internal consumption and zero on sale to outside the State and full input tax credit is also given for inter-State transactions. Punjab used to get a substantial purchase tax on paddy and wheat which have been subsumed in the GST.

The States having more economic activities and high consumption get more tax. The States which are most likely to make up the gap and will not require compensation are Andra Pradesh where the gap is 3 per cent, Uttar Pradesh (9 per cent), Telengana (11 per cent), Maharastra (14 per cent), Tamilnadu(14 per cent),etc.

The GST paves way for investment and helps growth of industry. More investment creates more economic activities and also consequently results in increased consumption. The State should encourage investments. Besides, a close monitoring of compliance under GST is needed to check leakage and augment revenue.

Collection of State GST in Odisha during the first quarter is Rs 2,275.62 crore as against collection of Rs 1,629.29 crore during the corresponding quarter of last year. The growth rate is 39.67 per cent which appears satisfactory. But collection of IGST during the first quarter is Rs 870.69 crore as against Rs 880.32 crore during the corresponding quarter of last year.

The growth rate is negative (-1.09 per cent). This shows consumption has not increased. The IGST accrues to the State on inward supply of goods from other States and its consumption in the State.

The high growth rate in collection of State GST is probably because of introduction of Tax Deduction at Source (TDS) from October, 18.

The TDS is collected at the rate of 1 per cent on supply of goods and services to the Governments and corporations. The balance amount is paid by the taxpayers at the time of return filing.

This is an advance tax and moreover, it creates an audit trail so that the supplier cannot evade tax.

On the other hand, it is seen return-filing in Odisha is dismal and a cause of great concern. Return-filings in Odisha is only 54 per cent where as it is 84 per cent in Punjab, 77.5 per cent in Uttar Pradesh and 81 per cent in Gujarat. Return-filing in Odisha is much lower than the national average which stands at 73.5 per cent.

The GST is jointly administered by Central and State authorities, but more taxpayers are assigned to the State. Ninety per cent of taxpayers having turnover up to Rs 1.5 crore and fifty per cent of taxpayers having turnover above Rs 1.5 crore are with the State authorities.

The State department has more stakes. GSTN throws up huge information and those need to be analysed.

Non-filers should be chased and action taken for non-compliance; returns should be scrutinised and enforcements undertaken.

The taxes subsumed in the GST contributed nearly fifty per cent of the State’s revenue and the authorities cannot afford any leeway in enforcement.

(The writer is a former Additional Commissioner, GST, Odisha)

Published On : 22-07-2019

Source : Daily Pioneer