UP seeks nearly ₹12K crore relief as GST growth dips by 21%

UNDER GST LAW, THE CENTRE GUARANTEED STATES A MINIMUM OF 14% ANNUAL RISE IN REVENUE

LUCKNOW Amid the Covid-19 pandemic, the growth in Goods and Services Tax (GST) collection has dipped by over 21% in Uttar Pradesh this financial year since April, prompting the state to demand Rs 11,826 crore as compensation from Centre.

UP is witnessing a negative tax collection this year for the first time since rollout of this tax regime in July 2017. It is also the first time that the state has sought major compensation from the Centre on the GST front.

“The pandemic has badly hit entertainment, hospitality and tour and travel industries, apart from affecting most other economic activities. Since GST is directly linked to sale of goods and services, all states, including UP are suffering revenue deficit requiring compensation from the Centre,” those aware of the issue said. The situation is contrary to the 14% annual increase guaranteed by the Centre to the states prior to the launch of GST. UP demanded compensation at a virtual meeting that the Centre held with the states on August 27. “We demanded compensation for the revenue shortfall we have already suffered between April and July this financial year,” a senior official said.

“Out of the total Rs 11,826 crore compensation that we have demanded, as much as Rs 8,000 crore is for the April-May lockdown period alone,” he added.

Under GST Law, the Centre guaranteed states a minimum of 14% annual increase in their revenue with the provision that it would provide compensation to any state that achieved a lower growth due to tax loss arising from implementation of GST for five years from the rollout. “In the first year, UP did claim Rs 308 crore compensation from the Centre, but did not have to demand a single penny as compensation during 2018-19 with the revenue increase being 20%, the highest in the country possibly after Telangana,” those aware of the issue said.

“Last year also, revenue increase was only a little below 14% and UP’s compensation requirement was only nominal,” they added.

Last year, the then Union finance secretary wrote a letter, praising UP for being one of the few states that did not require any compensation as its revenue collection was well above expectations. UP collected Rs 17,321 crore GST between April and July in 2018-19. The collection dipped to just Rs 13,613 crore during the same period of the current financial year. The revenue growth is -21.41% despite an enhanced annual target.