BENGALURU: Chief Minister BS Yediyurappa, who has weighed the pros and cons put up by the finance department on GST compensation, on Friday gave his authorisation on the payment of interest and repayment of debt from future cess collection. This was necessary as the Union government had earlier sought an official authorisation for the process to be followed.
Karnataka Representative in the GST Council and Home Minister Basavraj Bommai said, “Karnataka has chosen option one and will be entitled to borrow up to Rs 12,407 crore in 2020-21. The entire principal and interest repayment on the borrowing will be met from future proceeds of the cess. As such, the principal and interest need not be paid from the regular budgetary resources of the state.’’ He said, “We are happy that the Union government has accepted the entire amount of GST compensation due to the state and it is fully committed to discharge the legal obligations fully.
The GST Council has already resolved to extend the period of levy and compensation cess beyond July 2022 to provide funds for payment of arrears. We welcome the idea that the borrowing under option one will be directly arranged by the central government and passed on to the states as a loan.” Government sources said, “It is acknowledged that the borrowing raised by or on behalf of the state and interest on this borrowing for 2020-21 will be deducted from the GST compensation payable to the state from time to time.
This amount, however, will depend on the interest rate and will be around Rs 800 crore. Further, Karnataka will be entitled to GST compensation till the payment from the collection of cess is fully received. ‘’ The state had to send the authorisation by October 16 and the official communication was dispatched to the Centre on Friday.