Uttar Pradesh has presented its expenditure plan for the next five fiscal years to the 15th Finance commission. The plan estimates a loss of Rs 13,500 crore when revenue also did not remain untouched.
Losses germinating since the implementation of Goods and Services Tax (GST) will ripe itself to approx Rs 13,500 crore in 2022-2023. At the same, revenue in subsequent years after the five years of GST will also be affected. This is because, after five years of GST implementation i.e. post compensation period, the Government give not provide any compensation to the states for its losses.
U.P. has also made this request to the commission to take charge of the expected revenue loss after the compensation regime i.e. after June 2022.
“The GST collection of UP is estimated to be Rs 65,000 crore in 2022-2023, therefore the compensation will be around Rs 18,000 crore. But the Union government will provide compensation only till June 2022, five years from the date of implementation of GST 
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. Thus, in the last three quarters of 2022-2023, the loss of revenue is expected to be about Rs 13,500 crore and the revenue in the subsequent years may also be affected. Such losses in the post compensation regime need to be looked into by the finance commission,” said by the state government in its submission to the finance panel last week.
Many states have appealed for the extension of compensation period for GST to the finance commission but NK Singh, the chairman of the Finance Commission, expressed his expectations for the growth to deal with the revenue losses.
“As GST is a consumption-based tax, the real problem with states is that the guaranteed compensation will end in two years from now, which covers two out of the five years of my award period beginning 2020-21. Some of the states are worried because they are not getting that degree of growth. The changes in GST 
Many new provisions are allowed by the government and some old ones are amended in order to make GST a much more convenient and realistic form of tax governance. Read More… have now more or less settled down. I now see growth on a more positive wicket. I don’t believe it is necessary nor would it be appropriate (to extend GST compensation),” he said.
The compensation of Rs 27,955 crore & Rs 27,955 crore has already been paid by the Union government to the State government of UP for the period of June-July & April-May, respectively.
Further, the state has demanded Rs 2,80,520 crore and Rs 1,12,997.36 crore for 2020-2025 for the development of urban local bodies and infrastructural improvement in rural areas, respectively, such as setting up solar power plants, constructing panchayat Bhawan & cremation grounds, etc.
The UP officials inform that the union government asks the state government to examine and revamp its Fiscal Responsibility and Budget Management Act to meet the fiscal targets. According to the officials, the central government has quoted the RBI report on state finances of 2019-2020 and said State is staggering under the vex resulted out of the postponement of farm loan. It was also quoted that UP has encountered an overall decline of 44% in its capital expenditure.
