Government anticipates GST shortfall of Rs 40,000 crore

The Government of India is expecting a shortfall of around Rs 40,000 crore in the GST collections over what has been budgeted for 2019-20. This could put pressure on the compensation that states are eligible for in case the tax growth falls below 14% during the year.

A state finance minister said the Centre had informed the GST Council, which met in Goa on Friday, about the expected shortfall at a time when economic growth has slowed down. Most states were, however, optimistic that the government will find a way to meet the compensation requirements; otherwise, they may be forced to borrow from the market.

Economic growth has slowed in the country due to a string of factors and latest data showed that GDP growth slumped to a six-year low of 5% in the April-June quarter, hurting prospects for higher revenues. As part of the GST bargain, the Centre had agreed to compensate states for five years, if the annual increase in revenues was less than 14%.