Delay in release of GST compensation hits state schemes

The Congress ministers in Karnataka would be privately cursing the GST for the unexpected fund crunch they are facing when they are barely six months away from the Assembly polls. 
They are pushing for the launch of new welfare programmes and strengthen successful ones and take up road work before the end of the calendar year but the GST compensation as well as the Centre's release schedule of the state's share of central taxes have upset their calculations. The Centre is required to compensate states for any revenue loss they suffer due to switch to the GST regime. The states' share in the central taxes would also go down when CGST collections drop due to the recent spate of changes in GST rates, an official said. 
“We have been told not to ask for additional funds for welfare schemes. The finance department is facing difficulty even to meet whatever has been promised and budgeted,“ said the secretary of a department. Karnataka CM Siddaramaiah has been launching big-ticket populist schemes and some infrastructure projects too.Since he also holds finance portfolio, he is aware of the tight financial situation. “We can see the finance department struggling to scramble for funds where it cannot say no,“ said an official.“We have been informally warned of a budget cut this year,“ the official said. 
Krishna Byre Gowda, the minister who represents Karnataka on GST Council, said the state has just received Rs 1,189 crore of compensation for July-August. In a recent interview with ET, he said the Council's decision to release the compensation once in two months has put many states under tremendous pressure. 
In Tamil Nadu, determining Integrated GST (IGST) is leading to tax flow disruptions. The IGST for August had turned up in the first week of September. Tamil Nadu, an official said, would be managing with existing funds and channel the GST funds as they arrive for welfare schemes. “As of now, there is no crisis, but there is disruption and delay.“ 
States have been assured of 14% guaranteed compensation for five years under the GST regime. A top official with the TN finance department confirmed with ET that the state has not received compensation of the past two months. 
Telangana fears that continued fall in revenue collections could adversely impact its flagship programmes. 
The GST Council on Friday agreed partially to the demands of the Telangana government and further slashed the GST slab on the ongoing public works to 5% from the earlier agreed 12%, enabling the Southern state to obtain a further relief of around Rs 8,500 crore in a year, said an official.The ongoing public works include irrigation, potable water and tank desilting projects, he said. Further, he said the state government hopes that other states will also realise the significance and benefits of the demand being pursued by Telangana in the upcoming meetings of GST Council to insist on bringing down the GST slab to zero level on the ongoing public works taken up in pre-GST regime.
Source :  The Economic Times

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