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Kerala Govt. Roots for Fiscal Federalism, Increased GST Compensation Period

Neelambaran A |
The LDF government has been demanding the extension of the GST compensation period and increased allocation from the divisive pool. The political storm over the alleged non-submission of accounts from AG by the state proved wrong.
Kerala Budget

Image Courtesy: PTI

The opposition in Kerala, the United Democratic Front (UDF) and the media at large are running amok over the pending Goods and Sales Tax (GST) dues and the alleged 'non-submission' of accountant general (AG) audited statement for five years since 2017-18 by the state government.

Though the question asked by the MP from Kollam, N K Premachandran, was about the shortfall in the Integrated Goods and Sales Tax (IGST) and the revenue deficit grants, the union finance minister Nirmala Sitharaman chose to blame the Left Democratic Front (LDF) for the delay in disbursing the GST compensation.

How the union finance ministry disbursed Rs 41,779 crores to Kerala while only Rs 750 crores is pending, without the audited statement for five years as claimed by the minister herself, remains a mystery. The MP, other leaders of the UDF and the media have failed to raise this question.

The government of Kerala and several state governments, including the Bharatiya Janata Party-ruled (BJP) states, continue to demand the extension of the GST compensation, better fiscal federalism and the deserving allocation from the divisive pool to strengthen the finances of the state.


The questions raised by Premachandran, the MP from Revolutionary Socialist Party (RSP), a UDF ally in Kerala, in the Parliament sparked off allegations in the state on the GST issue again. The MP referred to the expenditure committee report of Kerala, pointing out the shortfall of Rs 5,000 crore/year.

The MP began his question with the accusation of several state governments on the improper disbursal of the GST compensation and revenue deficit grant. Proceeding further, his specific questions were about the IGST in the past five years and how much was disbursed by the Centre and the revenue deficit grants disbursed to the state in the last five years.

In her response, the finance minister spoke only about the GST compensation dues and refrained from answering the questions raised on the IGST and revenue deficit grants disbursed to Kerala.

She blamed the LDF government for not submitting the AG audited accounts for GST compensation for the financial years since 2017-18 and informed that the dues will be disbursed in one go if the state submits the statements.


But soon after the union finance minister's statement, the AG's office cleared the files. It turned out that Kerala had indeed submitted the statements as per the Comptroller and Auditor General (CAG) report submitted in 2021. Kerala is among the 19 states that submitted the report during 2017-18.

The report also stated that the audits of financial years 2018-19 and 2019-20 were pending since the union revenue department did not submit the data on compensation.

Given that the state government has received Rs 41,779 crore as GST compensation of the eligible Rs 42,639 crore, the statement of the union finance minister remains contradictory. The state finance minister K N Balagopal has also agreed that the state is yet to receive only around Rs 750 crore.

The Communist Party of India (Marxist) [CPI(M)] Kerala state unit questioned how the compensation was disbursed if the state government did not submit the audited statements from the AG.


The MP had claimed, during his question in the Parliament and later in a press meet, that the chief minister and finance minister had been accusing the delay in financial allocations from the Centre as the reason behind the imposition of cess on petrol and diesel.

Balagopal referred to the specific demands of several BJP and non-BJP-ruled states in extending the GST compensation and fiscal federalism. He also said the references of the MP were tricky and misleading.

"States like Tamil Nadu, Rajasthan, Chhattisgarh and West Bengal have demanded the extension of GST compensation by five years, considering the pandemic. Even the BJP-ruled states have raised similar demands", he said in a video posted on his social media account.

The minister said that the MP should have raised questions on the long pending demand of the state instead of painting the state in poor colour.

"The state is eligible to receive around 3.5% from the divisive pool, while we are allocated only 1.925% per the recommendations of the 15th finance commission. We would receive an additional sum of Rs 18,000 crore under this head. The MP should have raised these questions for the state's welfare," Balagopal said.

The fiscal policies of the BJP-led Union government have been opposed by several state governments, including Kerala, which has been criticising the GST regime loaded heavily against the states.

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