Revenue collection after the Goods and Services Tax (GST) regime came into force since July 1 last year has not seen a substantial increase in Karnataka. Contrary to the GST Council’s presumptive growth of 14% over the 2015-16 collections, the State has reported a growth of just above 1%.

Though the collections have remained stable, the growth has remained more or less the same with a 1% to 2% growth in 2017-18, a senior official in the Central Board of Indirect Taxes and Customs said. “Pro rata calculations for nine months of GST regime has shown a growth between 1% and 2% and nowhere near the presumptive growth of 14%,” the official said.

In 2016-17, the Centre levied and collected Central excise and service tax of about Rs. 49,000 crore, while the State collected VAT, sales tax, and entry tax, among others, to an extent of Rs. 49,000 crore, sources said, adding that the 9-month’s collections showed a marginal increase over the corresponding period of the previous financial year.

Incidentally, the compensation mechanism under GST assures a 14% annual growth in the State’s revenues. This is to protect the interest of manufacturing States, including Tamil Nadu, Karnataka, and Maharashtra, which were expected to be affected by the GST.

Acknowledging that Karnataka did not reach closer to 14% presumptive growth, a senior official in Commercial Tax Department said that it was the case with every major producing State. “It is an indicator to big States to strive to close the gap between the actuals and the presumptive growth by increasing compliance.” According to him, the shortfall was expected when the country’s tax regime transitioned from VAT to GST. “Shortfall in revenue collection was expected and had a built in system of compensation mechanism. Currently, Karnataka’s average shortfall in revenue collection is between 25% and 27%, which is being met through compensation cess given to us every second month.”

Study required

This marginal growth, according to the official, could be owing to the fact that overall incidence of indirect taxes has come down. “There needs to be some kind of a study required to understand the impact of the new regime. Rationalisation of taxes under GST since last September has brought tax rates down. We also see the average impact of indirect tax incidence was higher in the pre-GST era,” the official said. When asked if the GST regime shrunk the economy and affected industries, the official said the actual production numbers will tell the quantum. “If Karnataka sales tax figures on petroleum products are considered, the volume of consumption has almost remained the same. We have not got reports of fall in production or huge layoffs and there are no abnormal increase in prices of goods, all of which would have given indications.” The analytical part, which will give indicators, will take off after data flow becomes more even, he said.

Meanwhile, in the last one year, the number of GST registrations have increased since the roll-out. “In less than a year, we have added over 2.5 lakh new GST members, taking the total in Karnataka to over 7 lakh. The board is now looking into the increase in numbers in GST that is not translating into increased tax collection,” the official said.

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