GANDHINAGAR: Even as the ruling BJP government is gearing up to face a crucial assembly election next year, it finds itself in a Catch-22 situation.
Even as the government has begun making preparations for the 2022-23 budget, there is looming uncertainty over continuance of GST compensation from July 2022 and ending of Value Added Tax on petroleum products by bringing these under the GST regime.
Key sources close to the development said, “The state finance department has started planning for 2022-23 budget presuming that the five-year term of GST compensation will end on June 30, 2022 and that petroleum products will be included within GST from the next budget.”
“At present, we get around Rs 20,000 crore as GST compensation per annum against loss of revenue due to adoption of GST regime and have around Rs 25,000 crore per annum income from VAT on petroleum products. If we do not get these two resources in 2022-23 budget, we may have to cut our budget size drastically,” sources informed.
Explaining the predicament of the state government, sources said, “The state government has limited scope to mop up income to match loss of resources coming from GST compensation and VAT on petroleum products. It is likely that GST on petroleum products may not even be half of the actual income of VAT on petroleum products.”
Sources added that the government cannot cut budgets allocated to ongoing schemes or resist announcing new schemes as next year will be a crucial poll year. “For the moment, it is a tight situation for the state government and we hope the Centre will address this concern,” said sources.
Kanubhai Desai, finance minister, when asked about the planning for alternate financial resources in case the Centre stops giving compensation against loss of income from July 1, 2022 and if the Centre brings petroleum products under GST regime, said, “These are national level issues. All states are facing the same situation like us. Centre has always cared for Gujarat’s interest and we are sure it will do what is best for the state.”
Desai avoided any specific comment on whether the Centre will be requested to extend GST compensation deadline beyond June 30, 2022 and not include petroleum products under the GST regime.
