Post GST, Centre asks J&K to shore up its tax collections

State’s revenue compensation bill witnesses four-fold increase after implementation of one tax regime

Dismayed over nearly four-fold increase in tax compensation to Jammu and Kashmir post GST implementation, Union finance ministry has asked state government to shore up tax collections as J&K has witnessed drastic drop in its own tax collections post one tax regime.

The GST was implemented in J&K despite facing stiff opposition from business community and general public in Kashmir.

According to official figures, the revenue losses post implementation of GST submitted by the state government before centre for compensation stands at Rs 1,307 crore from July 8, 2017.  This loss is to be borne by the centre government.

However on the back of increasing tax compensations which the centre has to pay, the Union finance secretary Hasmukh Adhia has asked the state’s commercial tax officials to identify issues hindering their collections during a recent meeting held in New Delhi, according to a senior state government official.

“Both centre and state taxes have witnessed decline, which has burdened centre government with increasing compensation bill to J&K post GST implementation. Thus, union finance ministry asked us to shore up tax collections and address issues that are plaguing the GST collections,” the official said adding that this issue has come up after centre government has been witnessing increase in compensation on part of GST refund to J&K.

He added that as per provisions in Section 7 of the GST (Compensation to States) Act, 2017, loss of revenue to the states on account of implementation of Goods and Services Tax during the transition period would be compensated by the central government.

The Centre had agreed to compensate the states for revenue loss on account of GST implementation for a period of five years.

He said the compensation payable to a state is supposed to be provisionally calculated and released at the end of every two months during transition period of five years.

According to data of Union finance ministry, Jammu and Kashmir is one among the states that suffered losses in various sectors due to implementation of GST in the state. J&K unlike other states could earlier tax both services and goods.

“Union finance secretary Hasmukh Adhia in meeting has stated that there has been a spike in the bi-monthly GST compensation paid to the state by the Centre,” he said.

The Centre has paid Rs 14,930 crore to compensate states for revenue loss incurred in June and July, a nearly four-fold jump compared to Rs 3,899 crore paid for the months of April and May.

The loss of revenue to a state is calculated based on the difference between the actual realisation to a state under GST regime and the tax revenue it would have got under the old indirect tax regime after considering a 14 percent increase over the base year of 2015-16.

In 2017-18, the centre had released Rs 41,147 crore to the states as GST compensation to ensure that the revenue of the states is protected at the level of 14 percent over the base year tax collection in 2015-16.

The GST compensation for Jammu and Kashmir since July 2017 has jumped to Rs 1307 crore, surpassing the states like Andhra Pradesh, Arunachal Pradesh, and Tamil Nadu.

Jammu and Kashmir was the last state to implement GST rollout on July 8. The Jammu and Kashmir Goods and Services Tax Bill 2017 was adopted by a voice vote in the absence of opposition parties which accused the PDP-BJP government of undermining the special status of the state.


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