Government To Distribute Rs 35,000 Crore IGST Between Centre, States
The Centre will get about Rs 17,500 crore, and the remaining would be distributed among all the states.
The GST Council today decided to provisionally divide Rs 35,000 crore collected as Integrated Goods and Services Tax between the Centre and state governments.
The central government will get about Rs 17,500 crore, and the remaining would be distributed among all the states in the proportion in which they are currently getting IGST, a government official told BloombergQuint requesting anonymity.
Division of IGST between the will boost the indirect tax position of the central and state governments, Finance Minister Arun Jaitley told reporters after the 25th meeting of the GST Council today. IGST is paid on inter-state transactions, and credit on the tax paid can be claimed during subsequent level of transactions.
This will be a temporary measure, but with GST collections on a declining trend both for the Centre and states, the government could look at regularising it, the official quoted above said.
The government collected Rs 80,808 crore GST for November as on Dec. 25, said a statement by the Ministry of Finance. That compares with Rs 83,346 crore collected in October, Rs 92,150 crore in September, Rs 90,669 crore in August, and Rs 92,283 crore in July, according to statements issued by Ministry of Finance.
The proportion of IGST that would go to each state may be calculated by applying the projected revenue growth rate of 14 percent with 2015-16 as the base year, another senior finance ministry official said. The mechanism for this would be finalised soon, he added.
If a basis for settlement of IGST funds is being created it would only be an artificial one as of today, Bipin Sapra, an indirect tax partner at EY India told BloombergQuint.
Ultimately states are looking for more revenue and IGST is a parking fund, not a fund that centre or states have an access to, but it will eventually be divided between the two.Bipin Sapra, Indirect Tax Partner, EY India
It’s also possible that the IGST that is being distributed will be utilised as credit in future, Sapra added. Taxpayers claim credit for IGST paid when an actual transaction takes place.
“This would be a provisional way of doing it, in the sense that what will come later is being divided now to assuage the problem of both states and the Centre,” Vanaja Sarna, chairperson of Central Board of Excise and Customs told BloombergQuint. “This is just a solution which is temporary for this year.”
For inter-state transactions in July to October, all states received Rs 45,703 crore through settlement of IGST funds, according a press release shared by the government in November.