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Losses due to GST in FY23 to be Rs 13K cr: UP to Finance Panel

Uttar Pradesh has estimated that the state will suffer a loss of Rs 13,500 crore in 2022-2023 due to implementation of the Goods and Services Tax. Presenting its estimated expenditure plans for the next five years to the 15th Finance Commission recently, the state said its revenue in subsequent years too will be hit because of GST.
“The GST collection of UP is estimated to be Rs 65,000 crore in 2022-2023, therefore the compensation will be around Rs 18,000 crore. But the Union government will provide compensation only till June 2022, five years from the date of implementation of GST. Thus, in the last three quarters of 2022-2023, the loss of revenue is expected to be about Rs 13,500 and the revenue in the subsequent years may also be affected. Such losses in the post compensation regime need to be looked into by the finance commission ” the state government said in its submission to the commission last week."
An official from UP government also said that the state has asked for Rs 1,12,997.36 crore for 2020-2025 for activities such as construction of panchayat bhawans, cremation grounds, solar power setups and upgradation of rural local bodies.
For urban local bodies, it has proposed a grant of Rs 2,80,520 crore for the period. The government has already transferred Rs 27,955 crore to state as compensation in June-July and Rs 17,789 crore for April-May.
According to officials in UP, the commission asked the state to review its implementation of the Fiscal Responsibility and Budget Management Act to avoid fiscal slippages. Referring to the RBI report on state finances of 2019-2020, it has said that the state is reeling under the burden of farm loan waiver. There has been an overall decrease of 44% in UP’s capital expenditure, the meeting noted.
Many have urged the finance commission to extend the period for compensation for GST. But chairman NK Singh had earlier said that he would expect the growth momentum to take care of it. “As GST is a consumption-based tax, the real problem with states is that the guaranteed compensation will end in two years from now, which covers two out of the five years of my award period beginning 2020-21. Some of the states are worried because they are not getting that degree of growth.

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