Kerala demands extension of GST compensation by five years

Kerala Finance Minister KN Balagopal said the state has sought increased allocation under centrally sponsored schemes and compensation for loss of revenue from central transfers.
K N Balagopal
K N Balagopal
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Kerala on Thursday demanded extension of GST compensation period by another five years and a rehabilitation package for "return migrants" who have come back to the state from foreign countries amid the COVID-19 pandemic. In a list of demands submitted to the Union government during the pre-Budget meeting of Union Finance Minister Nirmala Sitharaman with state finance ministers, Kerala has also called for making the National Health Mission a fully centrally sponsored scheme as well as increased allocation for such schemes.

Briefing the media in New Delhi, Kerala Finance Minister K N Balagopal said the state has sought increased allocation under centrally sponsored schemes (CSS) and compensation for loss of revenue from central transfers due to reduction in share from the divisive pool, among other demands.

"Given the situation of poor revenue collection from GST due to COVID-19, it is highly necessary to have a policy decision of extending the period of GST compensation for five more years. Most often, there is a delay in releasing the GST compensation, which compels states to go for short-term borrowings bearing interest cost," the memorandum said.

While mentioning about Goods and Services Tax (GST) compensation, Balagopal said many other states have also raised the issue. The current period will end in June 2022.

The state has also pitched for rationalisation of cess and surcharges.

According to Balagopal, there are a lot of migrants, mainly from the Middle East, who have come back to the state following the pandemic and a special package should be there to help them get jobs.

Kerala has a significant number of people working overseas and remittances is a major contributor to the state's economy.

"There is a substantial increase in the return migration in Kerala, especially since the spread of COVID-19... we expect a liberal assistance from the Union government through the forthcoming budget... for a rehabilitation package specifically to the return migrants in Kerala," the memorandum said.

Around 10-15 lakh people have come back and are yet to go back, that is the preliminary estimate. There are also limitations for such people to immediately go back and find jobs, since now there are rising COVID cases, the minister pointed out.

Among other demands, the state has asked for increased allocation in CSS.

In the National Health Mission, contribution from the Centre is 60 per cent and the rest of the amount is contributed by respective states.

Against the backdrop of potential resurgence of COVID cases, Balagopal said the National Health Mission should be made a "100 per cent CSS".

Kerala has also demanded increasing the allocation under CSS to compensate the "steady decline in the state's share of devolution". Besides, it has pitched for allowing state-specific grants as recommended by the Finance Commission. 

While emphasising the need to increase public expenditure, Balagopal said there should be front loading of capital expenditure, especially considering joblessness and the current economic situation.

Another demand put forward is for urgent payment of central share (50 per cent) of the UGC Pay revisions arrears amounting to Rs 1,061 crore to the state.

Further, Kerala has asked for a "special assistance package" for adequately supporting the counter cyclical measures taken by state governments in their endeavour to stimulate economic recovery.

About GST, the minister said there are certain shortcomings in its implementation and also the issue of fake bills.

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