Karnataka CM Bommai demands extension of GST compensation period to states

Karnataka Chief Minister Basavaraj Bommai on Thursday demanded the Centre to extend the GST compensation period to states beyond 2022, for three more years.

After a meeting with Union Finance Minister Nirmala Sitharaman, the CM said he also discussed the GST (Goods and Services Tax) dues to the tune of Rs 11,000 crore to be paid to Karnataka in installments.

"The dues that were to be paid from July 2022 are being advanced through installment from this year. Along with this, I discussed extending the GST compensation to states beyond 2022," he told reporters.

In the meeting, the CM informed FM Sitharaman that the state GST collection has not yet stabilised in view of the Covid-19 crisis, and it would be more helpful in this ongoing revenue crisis if the GST compensation to states is extended for three more years.

Karnataka is one of the best performing states since the enactment of GST in 2017. "However, the Covid-19 crisis since the last financial year has brought the state revenue collection down including the GST collections," he said in a representation made to the FM.

In the meeting, Bommai -- who is also a member of the GST Council -- also flagged that the 15th Finance Commission in its final report for 2021-26 recommended a reduction in Karnataka's share in tax devolution to 3.647 per cent, as compared to 4.71 per cent recommended by 14th Finance Commission.

Since Karnataka has seen the steepest cut of 23 per cent because of the reduction in the devolution share, he requested the FM to reconsider the criteria of horizontal devolution for sharing of resources between the states.

The CM also informed that the state government had submitted an additional memorandum to the Commission in this regard. But the Commission has not considered the state's request.

"This has severely impacted Karnataka compared to other southern states," he noted.

The CM also brought to the notice of the FM that the Central government has not considered the 15th Finance Commission recommendation to award state-specific grants of Rs 6,000 crore to Karnataka for holistic improvement of water bodies of Bengaluru and for Peripheral Ring Road.

That apart, the NABARD assistance given to different groups including SC and ST women, Self Help Groups and for infrastructure purposes-- was also discussed in detail with the FM, he added.