The central government on Monday prepared to release Rs 840 crore in its latest tranche of GST compensation for Karnataka, which had been hoping for a bigger sum to cope with the financial crisis.
The funds will be provided under a special borrowing window that the Centre created in the wake of the pandemic to continue compensating states for the revenue shortfall linked to the implementation of GST. The goods and services tax, which was rolled out in 2017, ended certain local levies, and states are therefore compensated for the loss of these revenue streams
The amount of Rs 840 crore will be the sixth tranche of GST compensation that the Centre will release after setting up the borrowing window on October 22. So far, Karnataka has received Rs 5,157 crore through this route, while another Rs 1,776 crore has come under the regular GST compensation scheme.
“The Centre is releasing a tranche once in 10 to 15 days. We hope the trend continues till the end of the current financial year,” said BT Manohar, a member of the Karnataka state GST advisory council.
The Centre owes Karnataka Rs 18,671 crore and it is releasing funds in small instalments. “We have been getting GST compensation, but not in a big way. We expect the Centre to increase the size of instalments, otherwise it won’t be able to settle the dues before the end of the fiscal,” said an official in the finance department.
The total amount of GST compensation that the central government must distribute among states is Rs 1.1 lakh crore. So far, it has borrowed and released Rs 36,000 crore. It will repay these loans with the help of a cess on certain luxury goods. This cess will be levied for two years after 2022.
Officials say fund-starved Karnataka is heavily dependent on GST compensation as local revenue collection is not encouraging. In November, the state GST, or SGST, collection stood at Rs 6,917 crore compared to Rs 7,395 crore in October.