Kerala likely to get ₹9,006 crore

GST compensation till January 2021 as per Centre’s decision to borrow

Kerala is likely to get ₹9,006 crore as Goods and Service Tax (GST) compensation till January 2021 as per the Centre’s decision to borrow through a special window and provide back to back loans to States in lieu of the compensation.

Of the anticipated ₹9,006 crore, ₹5,767 crore will be from the Centre’s borrowing for States. The remaining ₹3,239 crore is from the projected GST cess this year by the Finance Department for April 2020-January 2021 period.

For the State, this will be a big relief as it can avoid the deduction of salary of government employees and teachers. The State needs ₹2,500 crore to pay salary every month. Mobilising resources to fight the spread of COVID-19 is another challenge.

The State, while welcoming the initiative of the Union Finance Minister, is putting pressure to borrow ₹1.70 lakh crore instead of the ₹1.1 lakh crore. The State is of the view that the total shortfall in the collection of GST estimated at ₹2.35 lakh crore should be provided this year itself.

However, the State has not officially announced that it has accepted the Centre’s offer. Finance Minister T.M. Thomas Isaac, in a tweet, said Chief Minister Pinarayi Vijayan has put off the scheduled high-level meeting of officials of the Finance and Law Departments to discuss ways to approach Supreme Court on the GST.

“Having amicably settled the question of who should borrow, we hope Union Finance Minister Nirmala Sitharaman will address the question of how much to borrow through dialogue with State Finance Ministers,” Dr. Isaac said in the tweet.

Kerala, which is looking forward to the GST compensation arrears from March 2020 to overcome the financial crisis, had not benefited from the compensation of ₹20,000 crore to States towards loss of revenue during 2020-21 and ₹25,000 crore towards Integrated Goods and Services Tax (IGST) of 2017-18 announced after the 42nd GST Council meeting on October 5.

An amount of ₹915 crore had reached the treasury on October 5 night itself from the compensation towards loss of revenue. But the ₹834-crore from the IGST is yet to be made available.

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