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Karnataka CM Kumaraswamy meets Jaitley, seeks extension of GST compensation period

Karnataka Chief Minister HD Kumaraswamy on Thursday met Union Finance Minister Arun Jaitley to seek an extension of the GST compensation period till 2025, contending that the Karnataka’s revenue deficit has widened to 20 percent post-GST regime.

At present, the states are entitled to get compensation for the first five years since the implementation of Goods and Services Tax (GST) in 2017, that is till 2022.

In a meeting that held in Parliament Complex, HD Kumaraswamy informed Finance Minister Jaitley that the revenue deficit of the state against protected revenue may continue even after 2022 which is expected to affect fund allocation for various welfare schemes and infrastructure projects, an official statement said.

HD Kumaraswamy said that, Although there is an improvement recorded in the Goods and Services Tax collections in this financial year compared to the financial year 2017-18, the gap with protected revenue is “substantial” and may well continue beyond 2022.

He added in a representation made to the Union Finance Minister, “During the VAT regime, Karnataka used to register 10-12 percent of average growth every year. But post-GST, the revenue deficit is found to be 20 percent against protected revenue”.

Kumaraswamy asserted that “All efforts are being to minimize the revenue leak, but Karnataka has found certain fundamental structural reasons for this deficit such as current tax rates and less than expected contribution of services sector among others”

As per the official data, in 2017-18, the Centre had released Rs 41,147 crore to the states as GST compensation to ensure that their revenue is protected at the level of 14 percent over the base year tax collection in 2015-16.
Later in the day, Karnataka Chief Minister HD Kumaraswamy also met Prime Minister Narendra Modi.

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