A panel of finance ministers decided on January 22 to scrutinise the GST collection on services by states to find out if they are taxing them correctly, said Bihar Deputy Chief Minister Sushil Modi.

The panel has been formed by the GST Council to look into the revenue shortfall being faced by states after the implementation of GST. The seven-member Group of Ministers (GoM) headed by Modi also decided to look into issues concerning input tax credit with a view to finding out if they were contributing to the revenue shortfall.

“It has been decided that a committee of officers will study the collection of tax on services by the states. It is apprehended that states may not be collecting the due GST on services as unlike the Centre they do not have expertise in taxing services,” Modi said.

He further said that the GoM has decided not to rope in any third party experts to study the reasons for the revenue shortfall. The GoM, which was set up on January 1, will meet again in February.

As per the terms of reference set by the GST Council, the GoM was given the option to rope in experts from National Institute of Public Finance and National Council for Applied Economic Research to assist them in the analysis of states’ revenues.

Out of 31 states, only Andhra Pradesh and five northeastern states - Mizoram, Arunachal Pradesh, Manipur, Sikkim and Nagaland - have recorded revenue increase post the GST rollout.

Several states, including Punjab, Himachal Pradesh, Chhattisgarh, Uttarakhand, Jammu & Kashmir, Odisha, Goa, Bihar, Gujarat and Delhi, are facing revenue shortfall following the implementation of GST. These states faced a revenue shortfall in the range of 14-37 per cent in the April-November period. Among Union territories, Puducherry faced a maximum shortfall of 43 per cent.

The committee of officers, Modi said, will try to find out why big states are facing a revenue shortfall while their smaller counterparts are doing well in terms of GST collection.

The Centre has released Rs 48,202 crore as GST compensation to states during April-November 2018, higher than the Rs 48,178 crore paid in the previous year.

GST was rolled out on July 1, 2017. As per the GST law, the Centre compensates states to ensure that their revenue is protected at the level of 14 per cent over the base year tax collection in 2015-16. The GoM was mandated to undertake data analysis using econometric and statistical tools and suggest “suitable measures and policy intervention” for course correction for revenue augmentation, particularly for the states facing high revenue shortfall. Among other things, it will also take into account trends of revenue collection before and after GST implementation.

The GST collection dropped to Rs 94,726 crore in December, lower than Rs 97,637 crore collected in November, according to the finance ministry. In the nine months (April-December) of the current fiscal, the government has mopped up over Rs 8.71 lakh crore from GST.

The 2018-19 Budget had estimated annual GST collection at Rs 13.48 lakh crore, which means a monthly target of Rs 1.12 lakh crore.