Kerala has reiterated its demand that the Goods and Services Tax (GST) compensation should be extended to States by another five years. Finance Minister K. N. Balagopal presented the demands in a letter to Union Finance Minister Nirmala Sitharaman at the 47th GST Council meeting on Wednesday.
The State wanted the ratio of GST revenue sharing between the States and the Union to be expanded from 50:50 to 60:40 in favour of States. Further, the State also wanted the Centre to phase out the ”unusually higher rate of cesses and surcharges” collected by the Centre.
”To catalyse economic growth and lend support to sections of society who bore the brunt of the pandemic, the States cannot cut back their welfare spending at this moment and in the near future. With rigid borrowing conditions and downwardly inflexible expenditure, even if the revenue grows in a normal manner, the State’s finances will face liquidity constraints. It is in this context that the continuance of GST compensation becomes critically important for the States,” said Mr. Balagopal.
The State also noted that the Central surcharges and cesses have been increasing from around 10% to 20% over the last decade. This has reduced the share of State from the divisible pool as a percentage of the Gross Tax Revenue of the union, the State said.
