Low tax collection in most of the Indian states may hit their spending capacity as GST collection may fall short of its annual target this year. In most of the states including Andhra Pradesh, Tamil Nadu, Kerala and Rajasthan, the slippage has been more than 10% so far in this financial year. Thus a sharp pick up in collections will be needed in the next few months to meet the target, said Care Ratings in its report. Amid the Narendra Modi-led government’s fiscal measures aimed at reviving the sagging economy, revenue shortfall may burn a deeper hole in the government’s pocket.
To compensate for GST shortfall, the government has recently increased the monthly GST collection target, however, if the macroeconomic growth does not keep pace, it may become difficult to achieve the goal. The centre will compensate the states in case collections do not meet the 14 per cent growth benchmark which may again pressurize the former as the compensation cess pool has to be used for the same.
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While slippages are likely in the case of the states, the centre, in isolation, seems to have less trouble in reaching the target. “As per the latest accounts for October, in the case of the central government, CGST collections were Rs 2.84 lakh crore and compensation cess Rs 55 thousand crores. The comparable figures for last year were Rs 2.62 lakh crore and Rs 55 thousand crores respectively” said the report. As per cent of the budgeted amount, the proportions achieved so far this year are 54 per cent and 50 per cent respectively which is more on track than those of the states, it added.
Economic growth in India is majorly hit by slow demand and consumption in the domestic market, adversely affecting the prices of petroleum products as well. “With moderation in crude oil prices, collections from petro products have also been affected at both the levels,” said Care Ratings in its report.
Meanwhile, crude oil production during November 2019 was 8.69 per cent lower than the target and 5.98 per cent lower when compared with November 2018, according to the Ministry of Petroleum & Natural Gas. Similarly, the cumulative crude oil production during April-November, 2019 was 5-6 per cent lower than the target for the period compared to the corresponding period of last year.
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