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Pandemic and GST Revenue: An Assessment for Union and States

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  • Mukherjee, Sacchidananda

    (National Institute of Public Finance and Policy)

Abstract

Uncertainties surrounding GST collection in financial year 2020-21 have heightened due to ongoing COVID-19 pandemic. Given that economic activity is gradually returning to prepandemic levels, this paper projects overall as well as state-wise GST collection for 2020-21. The estimated GST collection of 2020-21 is the sum of realized GST collection during April to October 2020 and projected GST collection during November 2020 to March 2021. The study builds different scenarios based on monthly (year-on-year) growth experience with different assumptions about the likely base of GST collection for the remaining months of the current fiscal year. The revenue gap is estimated for states by taking the difference between the projected GST collection and revenue under protection in GST for 2020-21. The difference between the projected GST compensation cess collection in 2020-21 and sum of the revenue gaps of states provides the expected additional revenue requirement for full GST compensation payments to states. Acknowledging that a part of revenue loss is due to the pandemic, and that the compensation mechanism to fill the shortfall for 2020-21 and coming years is still evolving in the GST Council, present paper contributes to the ongoing debate on GST compensation requirements of states by projecting alternative set of numbers for the year 2020-21. As per our estimates, shortfall in GST compensation fund is expected to be Rs. 1.95 lakh in the best case scenario as against Rs. 2.35 lakh crore estimated by the GST Council. In the worst case scenario, the shortfall will be Rs. 2.45 lakh crore for the fiscal year 2020-21.

Suggested Citation

  • Mukherjee, Sacchidananda, 2020. "Pandemic and GST Revenue: An Assessment for Union and States," Working Papers 20/327, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:20/327
    Note: Working Paper 327, 2020
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    File URL: https://www.nipfp.org.in/media/medialibrary/2020/12/WP_327_2020.pdf
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    References listed on IDEAS

    as
    1. Badola, Shivani & Mukherjee, Sacchidananda, 2020. "Factors Influencing Access to Formal Credit of Unincorporated Enterprises in India: Analysis of NSSO's Unit-level Data," Working Papers 20/326, National Institute of Public Finance and Policy.
    2. R. Kavita Rao, 2008. "Goods and Services Tax for India," Macroeconomics Working Papers 22976, East Asian Bureau of Economic Research.
    3. Dubey, Jay Dev, 2020. "Income elasticity of demand for health care and it's change over time: Across the income groups and levels of health expenditure in India," Working Papers 20/324, National Institute of Public Finance and Policy.
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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic policy > Tax revenue

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    Cited by:

    1. Chakraborty, Lekha, 2021. "Macroeconomic Framework of Union Budget 2021-22: Reconsidering the Fiscal Rules," Working Papers 21/328, National Institute of Public Finance and Policy.

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    More about this item

    Keywords

    Revenue Projection ; Goods and Services Tax (GST) ; Revenue Under Protection (RUP) ; GST Compensation ; Tax Effort ; Tax Compliance ; India.;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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