The devastation caused by the recent floods in Kerala triggered a discussion at the 30th meeting of the GST Council, held on Friday. States and the Union government, understandably devoid of political reasons, want to set high benchmarks for standard setting of Kerala and all future disaster relief in the country.
The GST Council would have already been within its powers to announce a special GST rate in the event of a natural calamity. Kerala Finance Minister Thomas Isaac had presented before the council the need to impose a special levy on GST in Kerala.
“One view expressed in the Council was 'Must the entire burden be borne by the people of the state suffering from natural calamities?'. Then there is also the issue of one state having different taxation and transhipments shifting to the neighbouring state,” said Arun Jaitley, briefing after attending the council meeting over video conference from his office in north block.
The council also wanted answer to other questions like what natural calamities could qualify for receiving separate funds, apart from the central assistance to states under the National Disaster Relief Fund (NDRF).
“A seven-member group of ministers (GoM) will be constituted to look at how the cess will be levied and also other issues raised by the council in the meeting,” said Jaitley. He said that ministers of quake-prone northeast states and cyclone-prone coastal states will also be included in the disaster relief ministerial panel formed under the GST Council.
"The GoM will set the future course of action that could be taken by the GST Council in terms of providing disaster relief," said Jaitley. This year, an anticipated shortfall in indirect revenue is possible. But with direct tax collections looking up, the government is hopeful of not overshooting on its fiscal deficit target.
The minister said that GST revenues were becoming stronger in its second year. Finance Secretary Hasmukh Adhia had visited five to six states where collections were very low. He has presented a report on each states.
“Initially, it was thought that consumer states would be losing out and producer states will benefit after the GST comes in. I think that myth is busted,” said Jaitley. Five of the seven northeast states and Telengana were the only six states whose GST revenue was higher than anticipated.
All other 23 states registered a marginally lower GST revenue of 3-4 per cent, and certain producer states like Gujarat, Maharashtra, Himachal Pradesh and Punjab clocked 10-20 per cent. “With a recovery of consumer demand in the economy, we expect the second year of GST would be better,” said Jaitley.
Currently, according to the finance ministry data, GST collections shortfall this year had narrowed to 13 per cent from revenue target of Rs 13 lakh crore, from a 16 per cent deficit in collections last year. The number of on-time return filers had also seen an improvement.
“States having shortfall in collection are also allowed a compensation. If you consider that, their revenue shortfall only optically seems to be less,” said Jaitley. “States will see the benefit and all their deficits would become neutralised in five years,” he added.
The central government is still defiant about the deficits in collections for a number of states. “There are about 10 states whose revenue shortfall are above 20 per cent. But for the rest, if the IGST compensations, which is bit delayed, is also considered, there will be actually no shortfall,” said Hasmukh Adhia, revenue and finance secretary, talking to THE WEEK, after the GST Council meeting.
