‘Kerala Finance Minister KN Balagopal has urged the Centre to urgently disburse the GST compensation arrears to States as most are in a serious fiscal crunch. Kerala alone has an arrear to the tune of ₹12,000 crore.

The five-year period for GST compensation ends by June this year and it is high time the Centre settled the arrears, he said while addressing a webinar on the Economic Survey 2021-22 and the Union Budget for 2022-23, organised on Thursday jointly by the Gulati Institute of Finance and Taxation ( GIFT) and the Economics Departments of the Central University, Kasaragod and the SB College, Changanassery.

‘Serious Impact on States’

The Union Budget for 2022-23 had kept a silence over the issue which will have serious impact on the financial status of the states. While their revenues have been falling due to Covid-related issues and the general economic slowdown, expenditure has been shooting up due to carious healthcare and welfare initiatives, the minister said. There is therefore a need for a complete revamp of the financial relations between the Centre and states. This is inevitable if only for shoring up the latter’s delicate finances as also for stabilising the federal character of India as a nation, the minister said.

“What we see instead is that while the Union Budget had last year allocated ₹35,000 crore for Covid vaccination, it has been cut drastically to ₹5,000 crore this year. This could is upset the State’s calculations since most of them have not yet completed administration of the second dose,” the minister said.

Booster dose administration

Further, the booster doses are pending to be administered. States alone cannot afford the huge expenses for this round. The Centre should urgently allocate funds for this purpose as Covid continues to be a serious threat to the people and the economy. Balagopal said that the borrowing limit for states have been enhanced to 4.5 per cent of GSDP, but stringent conditions attached do not make it a worthwhile option. Separately, the Union Budget has proposed to advance ₹1 lakh crore to states as long term loans.

Kerala may get ₹2,000 crore this way, but this is not at all a solution for the acute fiscal crisis confronted by the states at large. The Centre is not serious in helping them out in a crisis period like this, Balagopal said.

‘Size of grants cut down’

Various Central grants to Kerala, including fiscal deficit grant, have been cut down in size in recent years. Awards by various Finance Commissions have been tweaked to the state’s disadvantage. Net result is that progress achieved on various fronts, including healthcare and education, are now becoming a millstone around its neck.

Balagopal also said that the Union Budget had no proposals to enhance direct taxes and had refrained from taxing the super rich. Instead, the Centre has chosen to widen the scope of indirect taxes, which affect interests of the common man badly.

Indirect taxes targeted

Here, the minister pointed to the Centre’s initiatives at enhancing revenue by increasing special excise duty, surcharge and Cess, which do not come under the divisible pool. This also makes states fiscal position very difficult, he said.

KJ Joseph, Director, GIFT, presided over the opening session of the webinar and RK Singh, Additional Secretary, Finance, Kerala, delivered the keynote address.

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