Revenue Shock Awaits Odisha When GST Compensation Period Ends In 2022: Report

New Delhi: Odisha has been identified as one of the five major states which would be significantly impacted when the provision of compensation under GST comes to an end in June 2022.

The National Institute of Public Finance and Policy (NIPFP), an economic think tank in a report, has said that the withdrawal of GST compensation and the overall fall in States Goods and Services Tax (SGST) collection will substantially hit the state finances of Punjab, Odisha, Goa, Chhattisgarh and Karnataka.

Smaller states such as Himachal Pradesh, Uttarakhand, Tripura and Meghalaya will also be affected, the report said.

Putting a consolidated figure, it said the revenue gap for the states could be as high as Rs 1.23 trillion.

The five-year compensation from the Centre on account of the GST transition period comes to an end on June 30, 2022.

The report does not augur well for Odisha. The state, which has been reeling under financial stress, reported just about 2 per cent growth in GST collection in December 2019. In December, its GST collection stood at only Rs 1146 crore as against Rs 1018.77 crore achieved during the same period in 2018.

According to the NIPFP report, Odisha like other affected states will need to either generate an equivalent amount of revenue from existing sources to continue with committed expenditures or cut down expenditures to cope with the revenue shock.

Any shock to state finances due to withdrawal of GST compensation after the transition period may have a profound impact on India’s fiscal management and therefore macroeconomic stability,” the report warned, findings of which have been reported in business portal Live Mint.

Several states, however, have already approached the 15th Finance Commission for a possible extension of the GST compensation period up to 2024-25.