A taxing issue

06 SEP,2020 | MEDC


 

The GST shortfall is becoming a taxing issue for the government. Thanks to the prolonged lockdown, economic activity has come to a standstill, and so, tax revenues have been affected. With almost two-thirds of economic activity severely disrupted due to the pandemic, unemployment has risen, and the result is clearly seen in the declining direct and indirect tax collections. It needs to be stressed that there is no issue in the implementation of the GST … the problem lies in this massive black swan event that is currently engulfing us, and leading to an unprecedented revenue shortfall. The states have rejected the proposals made by the Centre to compensate them for the tax shortfalls. As things stand, a strategic disinvestment in state PSUs seems to be the only way out of this perilous situation. With the virus making a comeback in many states, the situation is not likely to improve anytime soon, and probably the very concept of cooperative federalism needs to be re-examined under the circumstances.

*Photo Credit: Google

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