GST compensation: Karnataka at Rs 5,600-cr deficit

The state government is staring at a revenue shortfall of around Rs 5,600 cr, with fears abound that Goods and Services Tax (GST) compensation payment for the month of October and November will also be delayed.

This was after Central government held up GST compensation payment for the months of August and September for the first time since the introduction of in July 2017.

Karnataka, which is facing a financial crunch due to farm loan waiver and damages on account of one of the worst floods in the century, was not paid GST compensation of Rs 2,800 cr for August and September. Now, Finance department officials fear that payment for the months of October and November, which is due on December 10, might also be delayed, affecting the state’s finances.

This has caused an overall revenue shortfall of Rs 6,000 cr for the four-month period, and has hampered various development activities in the state.

I S N Prasad, Principal Secretary, Finance department told DH that the major challenge faced by the state due to pending GST compensation payment was the implementation of government schemes. “Budgets are prepared as we are assured that such payments are made at regular intervals. Any delay will affect the programmes,” he said.

Sources said that a meeting of finance ministers from non-BJP ruled states with Union Finance Minister Nirmala Sitharaman over the issue was inconclusive. “Though the Centre has promised to release it soon, it is not clear by when. Another delay will hurt the
exchequer badly,” sources added.

GST compensation, it can be recalled, is the amount assured by the Central government to the states ahead of the GST roll out, in order to cover the revenue losses incurred due to the new taxation system.

According to Finance department data, as of December 6, GST compensation received by the state was Rs 8,815 cr. Overall GST compensation projected for Karnataka for 2019-20 was Rs 17,249 cr.
Data also show that a major part of compensation was amount was paid in full during the financial years 2017-18 and 2018-19.

While Rs 6,246 cr was paid against an estimate of Rs 6,130 cr in 2017-18, Rs 10,754 cr was paid against an estimate of Rs 10,800 cr in 2018-19.

If the central government fails to pay the dues, the development of the state will be affected. The union government is intimating all states that it is unable to pay the GST dues, KPCC president Dinesh Gundu Rao told reporters in Bengaluru on Saturday.

Punjab government has planned to approach the court.

“Our chief minister too, should do the same. The government should prepare a plan to address this issue and present statistics before the public. Yediyurappa cannot stay silent,” he said.