Goa stares at huge losses as GST revenue deficit touches 26%
The reduced GST rates may have brought cheer amongst the hotel industry across the country and to a state like Goa which is entirely dependent on tourism, but it will hit the coastal state hard as it faces a shortfall in tax collection.
The Goa government, like the other states sought additional compensation, but other than that it has no action plan to bridge the revenue gap. Goa CM Pramod Sawant said that after being compensated for two years by the Finance Commission it will seek measures and try to bridge the gap.
“At present our deficit is 26%. We are getting compensation and will continue to receive for another two years. We have requested the finance commission to enhance it and extend it for another three years. Until it stabilises it is necessary to enhance the compensation. Most of the states have asked this enhancement. At least two years we will be compensated after that we will put in measures to try and bridge the gap,” Goa Chief Minister Pramod Sawant said.
The recent reduction in GST rate for starred hotels is expected to cost the Goa government ₹100 crore but was considered necessary to help uplift a stagnating tourism industry. In addition to the revenue loss that the state has been dealing with on account of the reduction of GST on restaurants which was brought down to 5% more than a year ago the recent reduction in rates has been now extended to restaurants attached to hotels and outdoor catering.
Under the VAT regime, the state government used to earn Rs. 189 crore through VAT on food. At the current rate of 2.5%, (5% GST is being split between the state and the centre) the state is projected to earn only ₹43-crore from revenue on food, causing a shortfall of nearly ₹150 crore.
State tax on restaurants was one of the major contributors to Goa’s revenue collections. Before the GST regime was brought into force, VAT on Goa’s restaurants was levied to the tune of 12.5%. The recent reduction in GST has brought the tax levied to 5% of which state component of the GST rate will stand at 2.5% with the other 2.5% being the central government’s component. Effectively the state government’s share is being reduced by 10% from the pre-GST regime.
“Since GST has been implemented the state has lost around ₹400-crore on account of the reduction in restaurant rates alone,” a government official said on condition of anonymity..
For comparison, Goa’s revenue from mining was ₹400 crore per annum before it was stopped by the Supreme Court.
At the start of the GST regime, then CM Manohar Parrikar had promised that Goa being a consumption and service sector oriented state, it will gain revenue ranging from Rs. 600 crore - Rs. 1000 crore.
Chief Minister of Goa Pramod Sawant remains hopeful that revenues will increase and with Centre’s help the shortfall in revenue will not skyrocket.
“It is true that there will be a reduction, but with this, tourism will automatically grow and consequently our revenues will also grow. We are receiving compensation for now. There will be no direct effect on the state’s
collection. It (our shortfall) will not balloon too much because they (central govt) will take care,” Chief Minister Pramod Sawant said.