Karnataka Government accepts Centre’s proposal on GST compensation

Bengaluru: The Karnataka Government on Wednesday, September 2, decided to make up for the shortfall in goods and services tax (GST) compensation from the Centre.

The Centre had proposed that states could borrow money in order to meet their current GST revenue shortfall, an option that the opposition and economists have argued could push the states further into debt.

In a statement released on Wednesday, the BJP-led state government said, “Under Option I, Karnataka would be eligible for total compensation of Rs. 18,289 crore. Out of this Rs. 6,965 crore would come from the cess collected. For the remaining amount of Rs.11,324 crore, Karnataka would be able to borrow through a special window with the entire burden of principal and interest repayment being met out of (the) compensation cess fund in the future.”

The government said that the first option given by the Central Government would be “more beneficial” and will help in “augmenting its revenue in the present financial year”. It added that the option would also relax some of the conditions allowing it to borrow more without being linked to large-scale reforms in accordance with the economic stimulus package announced by the Centre in May.

It can be recalled that, in its budget announced on March 5 earlier this year, Karnataka had estimated a shortfall in GST revenue of Rs 3,000 crore in after taking into consideration the slowdown in the economy. Since then, however, this figure has risen almost four-fold owing to the lockdown.

Meanwhile, Kerala, Punjab, Delhi, Telangana and West Bengal rejected the proposal.

It is expected that the Congress and JD(S) will raise this issue in the upcoming monsoon session of the state Legislative Assembly. which is scheduled to begin on September 21.

Source: NK