‘Premature GST hurting small businesses, causing revenue shortfall’

New Delhi, Dec 14 (IANS) West Bengal Finance Minister Amit Mitra on Thursday attacked the Central government on what he called "premature GST launch" and said it had led to revenue shortfall of Rs 39,111 crore to states in just four months.

He said the "plummeting" GST collections by Rs 12,000 crore in one month was a serious cause of concern even as the premature implementation had led to serious problems for the small and medium enterprises which were "seriously hurting".

Mitra, also a member of the GST Council, said under the Goods and Services Tax (GST) Act, Rs 43,013 crore worth revenue per month was protected for the states.

"So in four months, we needed Rs 1.72 lakh crore while we have got Rs 1.33 lakh crore. That means there is a protected revenue shortfall in four months of Rs 39,111 crore," he said at the FICCI's Annual General Meeting here.

He added the total amount budgeted for in the GST Council was Rs 55,000 crore for the full year.

"...Whereas we already have a shortfall of Rs 39,111 crore in four months. Even if you assume some improvement, probably it will end up as Rs 80,000 to 85,000 crore. Where will that money come from?

"The central government's receipts have also sharply fallen from expectations. So states are worried what happens if Rs 80,000-85,000 crore becomes due from the central government as compensation," Mitra said.

He attacked the government over the sharp decline in GST collections between September and October.

"September GST collections were Rs 95,131 crore whereas October collections plummeted by Rs 12,000 crore to Rs 83,346 crore. Rs 12,000 crore decline in one month has never been seen before. That concerns me deeply.

"The question on the table is what will happen next month and the following month. Among economists there is a feeling that this is not going to stabilize in a day or two," Mitra said.

He added the main reason for this sharp decline was that small and medium enterprises were not able to file their returns.

He said under the "hastily-implemented" GST regime, the infrastructure was unprepared to handle the enormous number of returns and refund claims and hence manual systems had to introduced.

"It seems we have gone back a few steps even from the VAT era. In VAT era, we were completely digitised. Now we are still grappling with the fact that we have gone back to the manual.

"First by demonetisation, you kill the informal sector. Then you come to small and medium enterprises with this premature GST launch without homework. What you have done is that small and medium enterprises, which provide 40 per cent of GDP and 80 per cent of employment, are in a bad shape today," Mitra said.

However, Jammu and Kashmir Finance Minister Haseeb Drabu and Bihar Deputy Chief Minister Sushil Modi defended the landmark indirect tax reform, saying the government was making all efforts to improve collections.

Expressing hope that revenue collections under GST will stabilise over the next few months, Modi said an exercise was going on to compare pre-GST and post-GST tax collection data to find out the cause of the shortfall and to identify any malpractices responsible for that.

He said 80-90 per cent of issues related to GST rates were resolved after the Guwahati GST Council Meet of last month.

"Now the big issue is how to improve compliance and make the IT network more user-friendly. Refund is also a big issue where problems exist and we are trying to solve those," Modi said, adding the issue of input tax credit was also being worked out and complaints had reduced.

Drabu said the GST regime which we have arrived at was a result of decisions taken by the GST Council. "I take responsibility of every decision even if I don't agree with them.

"Many of the errors in the current GST structure are our contributions. But while this transition may not be as glamorous as globalisation and liberalisation, it is the biggest move towards formalisation of economy," he said.

Acknowledging problems faced by small and medium enterprises, Drabu said larger companies were not buying from small businesses due to lack of input tax credit and hence the composition scheme for small businesses should be adjusted to allow some input tax credit.

He also suggested abolishing the Maximum Retail Price (MRP) under GST. "MRP and GST regime don't go together. We need to abolish the MRP and allow market forces to arrive at prices."