On Thursday, Karnataka Chief Minister HD Kumaraswamy meets Union Finance Minister Arun Jaitley in New Delhi and sought an extension of GST compensation period till 2025, contending that the state’s revenue deficiency has widened to 20 percent post-GST regime.
Presently, the states are entitled to seek compensation for the first 5-years since the implementation of GST (Goods and Services Tax) in 2017, which is till 2022.
At the meeting organized in the Parliament complex, the Karnataka Chief Minister has informed Mr. Jaitley that the revenue deficiency in the state against protected revenue many continued after 2022, which is likely to affect fund allocation for several welfare schemes and infrastructure projects, reads an official statement.
Although there is an improvement in GST collections in Karnataka in the current financial year, which is compared to that of the financial year 2017-18, the gap with protected revenue is “substantial” and may continue even after 2022.
Mr. Kumaraswamy said in a representation made to the Union Finance Minister that “during the VAT regime, Karnataka used to register 10-12 percent of average growth every year. But post-GST, the revenue deficit is found to be 20 percent against protected revenue.”
He continued, “All efforts are being made to minimize the revenue leak, but Karnataka has found certain fundamental structural reasons for this deficit such as current tax rates and less than expected contribution of services sector among others.”
As per the official date, Centre had released Rs. 41147 crore in 2017-18 to the states as GST compensation to ensure that their revenue is protected at the level of 14 percent on the base year tax collection in 2015-16 as well.