It was a strange trap into which finance minister K N Balagopal fell on the eve of Valentine's day.
He wanted to say that union finance minister Nirmala Sitharaman had only hatred for Kerala but ended up suggesting that she was full of love and concern.
It began as a question about Kerala's finances in Parliament, raised by UDF's Kollam MP N K Premachandran.
He wanted to know why the Centre was not disbursing the Rs 5000 crore Kerala was entitled to get as its IGST (Integrated Goods and Services Tax) share annually for the last five years.
Sitharaman promptly ridiculed Kerala for being irresponsible but she either misunderstood the question or cunningly sidestepped Premachandran's query.
IGST vs GST
Instead of speaking of Kerala's IGST claims, about which Premachandran had asked, Sitharaman spoke of GST compensation. Both are separate components.
IGST claims refer to Kerala's share in the taxes collected from the inter-state sale of goods and services. This happens when a supplier purchases goods from another state but sells it in Kerala. In such instances, the centre collects the entire GST, the centre's and Kerala's share, and deposits the money in the IGST pool.
Kerala will get its share only when the purchased goods are sold in the state. Till then, the money will be kept in the Centre's IGST pool.
GST compensation is the money the centre is legally obliged to pay a state if it did not achieve 14 per cent annual compounded growth in its own tax revenue annually. The GST compensation ended on June 30, 2022.
Sitharaman's confusing reply
On February 13, in response to Premachandran's specific poser about non-disbursal of Kerala's IGST claims, Sitharaman said Kerala has not bothered to send CAG-certified statements for GST compensation since the 2017-18 fiscal.
She was asked about apples and she spoke of oranges.
"Please go sit with the state government and request them to send it in one go," she told Premachandran. She said the money would be disbursed in "reasonable time" on the receipt of the CAG-certified accounts.
In short, she hinted that money indeed had to be paid Kerala though it was the state's fault that the money was not claimed.
In defence of Sitharaman
Balagopal was quick to cut Sitharaman to size, or so he thought.
He said Kerala had received most of its GST compensation dues. "What remains to be paid is just Rs 750 crore," he said in a Facebook post on February 13. "There is no standing dispute between the Centre and Kerala over the delay in the payment of GST compensation," he added.
It was as if he was shielding Sitharaman from Sitharaman. Though it sounded like a defence of the Centre, Balagopal was only trying to discredit Sitharaman's assertion that Kerala was callous about securing its GST compensation dues. In the process, he even ignored Sitharaman's silence about Kerala's IGST claims.
More significantly, Balagopal was mocking at his own political narrative that the Centre was fiscally dehydrating Kerala.
When he said that there was nothing much left for Centre to pay as GST compensation, it was an admission that the Centre had transferred a whopping Rs 83,000 crore plus to Kerala as GST compensation alone since 2017.
Miserly or magnanimous
The GST compensation amount has swelled over the years. If it was Rs 2278.09 crore in 2017, the increasing fall in GST revenue growth in the state in the subsequent five years bloated it to Rs 27,252 by March 2022. By Balagopal's own admission, the Centre has paid almost all of it, only Rs 750 crore remain.
The compensation is in addition to the share of central taxes and special grants received annually from the Centre.
Here are the figures provided by Balagopal himself in the Assembly. In 2011-12, the total central transfers (share of central taxes plus central grants) was Rs 9699.58 crore. Ten years later, by 2021-22, it was Rs 47837.21 crore; a mighty jump of nearly 400 per cent.
Balagopal's numbers sneer at the logic he had given for imposing the 'two rupee' fuel cess. He had said the Centre's stingy ways had forced him to it. But a fat compensation and a near 400 per cent increase in transfers in a decade smacks not of meanness but generosity.
Crisis predates COVID lockdown
The LDF government has always blamed COVID for the fall in revenues.
Truth is, the revenue crisis had gripped Kerala even before COVID had struck. The first COVID lockdown was announced only on March 24, 2020. But the fiscal ending on March 31, 2020, recorded the first ever negative growth in state's own tax collection in Kerala's history.
A clear indication of administrative inefficiency. Then, the GST compensation shot up to Rs 15,538 crore, up from Rs 7128.93 crore in 2019. In other words, by Balagopal's admission, the Centre had to compensate heavily for Kerala's inefficiency.
From then on COVID took over and the compensation amount grew even fatter. In the next two years the compensation amounts were Rs 27,421 crore and Rs 27,253 crore.
Sitharaman stands corrected. Balagopal insists that she had been kind enough to clear the bills.
