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No funds for more GST aid to states, revenues to jump: Revenue secretary Tarun Bajaj

  • 27 Sep 2021
  • Garima
  • 344

On tax revenue growth exceeding the overall economic performance, Bajaj said a combination several factors including a trend towards greater formalization – and much better compliance were boosting the revenues.

Even as ‘all companies’ affected by retrospective taxation are ‘positive’ about settling their disputes under the special dispensation offered by the government, the Centre would secure indemnity covers from them in the cases where all ‘separate interested parties’ have not given undertakings to cease litigation after the disputes are settled, revenue secretary Tarun Bajaj told FE. Cairn Energy – the government had raised 98% of over Rs 8,100 crore collected as retrospective taxes from the Scottish energy firm – was on board to resolve the tax dispute, he said.

On most state governments likely facing a revenue shock due to the scheduled expiry of the GST compensation period on June 30 next year, the official pleaded an absolute absence of resources for extension of the mechanism, but said augmentation of GST revenues through rationalisation of the rates structure and improved compliance would likely ameliorate the situation. “Where is the money? The cess proceeds till March-end 2026 are required to finance the (special loan facility) for the shortfall in FY21 and FY22”, he said.

The GST compensation mechanism ensures 14% annual revenue growth for states for five years through June 2022. The designated cess fund fell way short of the required level in FY21 and is seen to face a huge shortfall in the current financial year as well. All states are looking for an extension of the cover.

Bajaj expressed the confidence that the Centre’s gross tax-to-GDP ratio would improve to a healthy 12% of GDP in the medium term (it was just 10% in FY21) and tax buoyancy would be over 1% from the current financial year onward. Higher revenues for the Centre would enhance devolution to states, he noted.

Gross tax revenue in the first four months of this fiscal surged 29% even over the pre-Covid (same period in FY20) level. If this pace of growth (over FY20) continues throughout this fiscal, gross tax collection will rise to Rs 25.93 lakh crore in FY22. It will drive up the tax-to-GDP ratio to 11.6% in FY22, the highest since FY08, far exceeding the budgetted level of 9.9%. This, of course, assumes that the nominal GDP for this year will touch the budgetted level of Rs 222.87 lakh crore, recording an annual expansion of 12.9% upon the provisional estimate for FY21. Tax buoyancy, too, will shoot up to as high as 2.2 in FY22.

Source- https://www.financialexpress.com/economy/no-funds-for-more-gst-aid-to-states-revenues-to-jump-revenue-secretary-tarun-bajaj/2338342/

 

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