Goods and Services Tax dues to States could touch ₹7 lakh crore by 2022

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The Commission is learnt to have recommended a unique fiscal glide path for each State for the period 2020-21 to 2025-26..
The gap between GST cess collections and the revenue shortfall faced by States for implementing the Goods and Services Tax (GST) could snowball to anywhere between ₹5 lakh crore to ₹7 lakh crore by June 2022 from the ₹2.35 lakh crore estimated for this year, the Fifteenth Finance Commission is learnt to have projected in its report.

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The Commission, which finalised its report proposing a framework for sharing revenues between the Centre and the States for the next five years on October 30, is learnt to have recommended a unique fiscal glide path for each State for the period 2020-21 to 2025-26, in a separate volume dedicated to States.

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Given the uncertainty created by the pandemic and the slowdown in the economy that pre-dated the COVID-19 virus, the panel, whose report will be submitted to President Ram Nath Kovind on Monday, has had to rely on variable growth projections for each of the five years rather than assuming a steady growth trend.

The panel has also delivered on its more unusual terms of reference, including the question of creating a separate mechanism for funding defence and internal security proposed by the Centre, citing inadequate Budgetary provisions for large capital outlays needed for complete defence preparedness.

“The Commission has examined and responded to the Defence Ministry’s proposal to set up a non-lapsable fund for security-related expenditure, whether it should be funded by a cess or a surcharge, and supplemented by monetisation of surplus defence land, issue of tax-free defence bonds and disinvestment of defence public sector units,” said an official, pointing to the additional pressure on the Centre’s finances due to the fall in revenues and the flailing economy.

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