As tax revenues decline, state finance directors will seek help.

A Decline in Tax Revenues 

According to government and industry experts, the top financial authorities will meet on Friday to discuss compensation for governments that are currently dealing with decreasing tax income while also preparing for additional costs associated with Covid-19 vaccines.

As the second wave of Covid emerges as more devastating than the first wave, many are infected with the virus so a review of taxes on medical equipment and supplies is also likely to be on agenda.

As India is facing a deadly second wave of Covid-19, a review is likely to be taken on medical equipment and its supplies. 

Loss incurred Tax Revenues

According to three government sources, the centre and state governments are expecting a loss in tax revenue of nearly Rs 2 lakh crore ($28 billion) in the fiscal year ending March 2022, while the centre’s mandate for states to cover vaccines for adults under 45 years would compound their troubles.

About Rs, 2 lakh has been dropped in tax revenues in March 2020. 

An amount of Rs63,000 is dues in goods and services tax by the centre for 2021. T S Singh Deo, finance minister of Chhatisgarh has said in a statement to Reuters ahead of the Goods and Services Tax council that “the central government must do the compensation”. 

A meeting is organized by Nirmala Sitharam- the Union finance minister where other states ministers will be joining for a discussion. This meeting is going to be held after a gap of 7 months and it is being expected that other state ministers are going to raise the questions on state revenues and better compensations not being awarded. 


As the government doesn’t have equity to fund as of now, they might extend the surcharge on GST up to 2022 and soft loans choice will be kept as a provision for immediate funding. GST, India’s most significant tax reform, was implemented in 2017 to replace a slew of federal and state taxes. State governments were guaranteed a five-year tax surcharge to compensate for any losses sustained as a result of the GST implementation.

According to an official who kept his identity anonymous with direct knowledge of the situation, a surcharge on GST rates on luxury products might be extended to compensate states.

According to experts, several states want to seek compensation beyond the present June 2022 deadline under the 14% annual rise in GST revenue growth guarantee.

A review has been sought by Manpreet Badal who is the finance minister of Punjab demanding the import tax on medical equipment such as oxygen cylinders, ventilators and drugs like Remdesivir and Fabiflu with incurred GST of 12-18%. He also advised that immediate preventive measures should be taken to tackle this pandemic.  


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