November GST Revenues Decline in Many States Amid Rate Cuts and Cess Exemption

This loan will be repaid by March next year, and compensation will no longer apply to any item. Meanwhile, in September, the GST Council meeting took a major decision to reduce GST rates. 90 percent of items previously in the 12 percent slab were moved to the 5 percent slab. This impact on GST collections in November was more pronounced for states.

The central government's total GST revenue also saw a mere 0.7 percent increase compared to November last year. According to GST experts, previously, the compensation cess compensated for the shortfall in states' SGST collections. Now, states will have to make up for it themselves.

The Finance Ministry clarified in Parliament on Tuesday that the government is not introducing any alternative cess or tax to replace the compensation cess to provide financial assistance to states. Many states that had promised freebies to the public during the elections are already under financial pressure.

In such a situation, a decrease in GST collections could be a cause for concern. GST collections are directly linked to the sale of goods. States with higher sales will also see higher GST collections.

GST collections include SGST (State GST), CGST (Central GST), and IGST (Integrated GST). SGST is entirely borne by the states, while CGST is entirely borne by the central government. IGST is divided between the states and the central government.

In November, compared to November last year, GST revenues in Jammu and Kashmir declined by 14 percent, Punjab by 13 percent, Uttarakhand by eight percent, Delhi by three percent, Uttar Pradesh by four percent, West Bengal by nine percent, Jharkhand by 30 percent, Madhya Pradesh by 17 percent, Andhra Pradesh by five percent, and Rajasthan by four percent. Several other smaller states also experienced similar declines in GST collections.