K’taka CM Yediyurappa thanks Centre for releasing long-pending GST dues of Rs 4,314 cr

The Chief Minister of Karnataka B S Yediyurappa expressed gratitude to the BJP government after Centre released over Rs 4,300 crore of pending GST compensation from the previous quarter. On Saturday, the CM tweeted thanking Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman for clearing the dues which were pending for four months.

The Chief Minister in his tweet said, “On behalf of the people of Karnataka, CM Shri @BSYBJP expresses his gratitude to PM Shri @narendramodi and FM @nsitharaman for releasing GST relief amount of Rs 43,143,340,000 for the loss incurred by the state for the period of Dec 2019- Feb 2020.”

The CM also tweeted a copy of the sanction letter dated June 4, in which the Centre directs the payment to the state. “I am directed to convey the sanction of the President to the "on account" Payment of Rs. 4314.1340 crore (Rupees Four Thousand Three Hundred Fourteen Crores Thirteen Lakhs and Forty Thousands only) as Grant-in-aid to the Government of Karnataka being the compensation for loss of revenue for months of December, 2019 to February, 2020 on account of implementation of Goods and Service Tax,” the letter stated.

The sanction letter also states that if the total GST compensation entitlement of the state falls below the total amount of provisional GST compensation already released, the excess payment shall be recovered from future claims or by direct debit to the state government's account as per the procedure.

The compensation comes at a time when the state government has revised its budget allocation as revenue was impacted due to the pandemic and the subsequent lockdown. The state has reportedly asked departments not to spend more than 50% of the budget allocation till tax collections improve. It also told all departments that it would be mandatory to get approval from the finance department to start any project and also to seek its concurrence for projects that are more than Rs 10 crore.

Earlier this month, the Excise Department said that it has collected a revenue of Rs 1,387.20 crore in May, which is 42% the revenue collected on average per month last year.

On Thursday, the finance ministry released Rs 36,400 crore to states as compensation for their revenue loss due to GST for the period from December 2019 to February 2020.

The ministry said in a statement that the Centre has released the GST compensation taking stock of the current situation due to COVID-19 where state governments need to undertake expenditure while their resources are adversely hit.

With this the Centre has released its entire GST compensation due to states for financial year 2019-20 and also given extra compensation for February that is accounted for in the current fiscal FY21.

When the GST regime was put in place, the Centre assured states that in the first five years, revenue shortfall arising from implementing GST will be fully compensated. 2015-16 was assumed to be the base year for calculating the compensation amount for a financial year. The growth rate of revenue for a state during the five-year period is assumed at 14 per cent per annum. Any shortfall in this growth number is to be compensated by the Centre.