K’taka for higher tax on luxury goods as Covid hits revenue

Cash-starved Karnataka on Thursday urged the Central government to increase GST on luxury goods to make up for the revenue shortfall caused by the Covid-19 pandemic, an official said on Thursday.

“State Home Minister Basavaraj Bommai, who represents Karnataka in the GST Council and participated in its 41st meeting through video conferencing on Thursday, told Union Finance Minister Nirmala Sitharaman to put more tax on luxury goods, tobacoo and pan masala for increasing the revenue and compensating states like Karnataka, which have been hit by the pandemic,” a finance department official told IANS here.

Admitting that the Covid-induced lockdown since March 25 and its extension till May 31 impacted revenue collection due to subdued economy and continued restrictions on a number of tax generating activities, Bommai said the state would miss the revenue target of Rs 1.8 lakh crore set for this fiscal (2020-21).

“With the war on containing the pandemic costing the state heavily, the Centre has to compensate us to make up for the revenue shortfall from lower tax collection in Covid times,” Bommai told the Finance Minister, who is a Rajya Sabha member from the southern state.

Though Chief Minister B.S. Yediyurappa also holds the finance portfolio and presented the state budget for this fiscal in the Assembly on March 5, he could not attend the GST Council meet as he is resting after recovering from Covid-19 earler this month.

Goods and Service Tax (GST) compensation for the state since April is Rs 13,764 crore, and its collection in the first four months was 71.61 per cent.

“The Centre should borrow more to compensate the state, which is reeling under financial crisis due to Covid disrupting life, livelihood and the economy and causing untold hardship since mid-March,” Bommai said.

A special cess is levied on the highest tax slab of 28 per cent on luxury goods to compensate the states for the revenue loss due to the GST subsuming state’s taxes and local levies.

“A reduced share in Central taxes, delay in GST compensation and loss of revenue due to the Covid-19 lockdown have pushed the state into financial stress,” added the official, citing the minister