Puducherry: The Puducherry government has not been able to reach the revenue it earned in 2015-16 even after five years of GST implementation. Therefore, the GST compensation should be extended for another five years and the revenue gap of Rs 1,300 crore should be covered,” asserted Minister Lakshmi Narayanan on behalf of the state government in the GST Council meeting.
In the year 2017, the Central Government GST was implemented across the country. Tax (Goods and Services Tax) was implemented. The central government announced that compensation will be provided for 5 years to compensate the loss of revenue to the state governments due to this new tax system.
Accordingly, every year, the central government provides compensation to the state governments. The payment of compensation to the states for five years is due to end today on the 30th.
In this situation, the GST Council meeting was held in Chandigarh for the last two days under the chairmanship of Union Finance Minister Nirmala Sitharaman. The various states that participated in it insisted on extending the GST compensation for several more years.
Impact of GST
Speaking on behalf of the State of Pondicherry, Minister Lakshminarayanan said:
The basic annual revenue of the State of Pondicherry is 1095 crores. However, the total GST revenue, including the settlement for the previous financial year 2021-22, reached only Rs 848 crore. The revenue gap is Rs 247 crore.
In Pondicherry, the revenue earned in 2015-16 could not be reached even five years after the GST came into force. The production generated substantial revenue from the central sales tax.
With the current consumption-based GST levy, Puducherry’s revenue has fallen sharply from pre-GST revenue. In 2021-22, the revenue gap was narrowed as GST brought compensation arrears to the tune of 21 per cent. Although the Puducherry government is making all efforts to increase revenue, the desired revenue growth could not be achieved due to structural problems.
If the GST compensation is not paid after last June, Puducherry will have a revenue gap of Rs 1,300 crore for 2022-23.
However, the level of regular federal funding has remained comfortingly stable over the past few years.
Request to extend
Due to these reasons, Puducherry Chief Minister Rangasamy has requested the Central Government, particularly the Union Finance Ministry, to extend the GST compensation for another five years.
If the revenue loss due to the implementation of GST is not corrected, Puducherry will lose revenue. In particular, projects will face problems due to a decrease in revenue to the tune of Rs 1,300 crore. Therefore, the request of the Puducherry government, which is suffering from structural problems, should be extended for another five years to cover the revenue gap.