GST compensation: Karnataka opts for first among two options offered by Centre
Bengaluru: BJP ruled Karnataka on Wednesday said it has decided to opt for the first among the two options offered by the Centre for borrowing to meet the shortfall in GST revenues, under which the state will be eligible for total compensation of Rs 18,289 crore.
The decision was taken after Chief Minister B S Yediyurappa, who also holds the finance portfolio, held discussions with Finance department officials.
"After the evaluation of both these options, it is felt that option 1 would be more beneficial to the State's finances.
Hence the Government of Karnataka has decided to convey to the Government of India, its preference for Option 1," an official release from the Chief Minister's Office said.
It said this would help the State augment its revenue in the present financial year.
The CMO noted that under option 1, Karnataka would be eligible for total compensation of Rs 18,289 crore, of which Rs 6,965 crore would come from the cess collected.
For the balance of Rs 11,324 crore, the state would be able to borrow through a special window with the entire burden of principal and interest repayment being met out of compensation cess fund in the future, it said.
"Further an additional borrowing up to 1 per cent of GSDP (Rs 18,036 crore) will be available unconditionally and another 1 percent borrowing can be linked to certain reforms as earlier suggested by Government of India.
These additional borrowings may also be carried forward to the next financial year if necessary," it said.
Under option 2, the CMO said Karnataka would be eligible for a total compensation of Rs 25,508 crore, out of which Rs 6,965 crore would come from the cess collected.
The remaining amount of Rs 18,543 crore would be allowed to be borrowed through an issue of market debt.
However, in this option, unconditional borrowing of 1 per cent of GSDP (Rs 18,036 crore) will not be separately available to the state, as a result of which the net borrowing will reduce substantially by Rs 10,817 crore, it explained.
Further, under option 2, the interest on the above borrowing through issue of market debt shall be paid by the State from its own resources, it added.
Following the GST council meeting last week, the central government had written to states, suggesting options of borrowing money to make up for the Rs 2.35 lakh crore shortfall in GST revenues expected in the ongoing fiscal.
The Centre has estimated that of this amount, Rs 97,000 crore compensation requirement is due to GST roll out and the remaining is on account of the COVID-19 impact on the economy.
Giving two options, the Centre had said states can borrow either Rs 97,000 crore the deficit arising out of GST implementation or the entire Rs 2.35 lakh crore.
Several non-BJP ruled states have rejected the Centre's suggestion of states borrowing to make up for the GST shortfall, saying the constitutional liability lies with the Union government.
Home minister Basavaraj Bommai, who represented the state in the GST council, had earlier said that Karnataka has to get Rs 13,764 crore GST compensation from the Centre for the last four months and it was necessary for the state's economy.
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Bengaluru (PTI): Karnataka Minister Priyank Kharge met a high-level delegation from Chile, led by Chilean Foreign Minister Francisco Pérez Mackenna, at Vidhana Soudha on Thursday to discuss collaboration in emerging technologies, clean energy, and startup ecosystems, officials said.
The delegation’s visit to Bengaluru, as part of its India engagements, underscores Karnataka’s growing prominence as a preferred partner for global collaborations in technology, innovation, and startup ecosystems, officials added.
The discussions reflected strong alignment between Chile’s evolving technology-focused growth strategy and Karnataka’s established leadership in innovation and deep-tech ecosystems, according to a statement.
Both sides explored opportunities to build partnerships that move beyond traditional sectors and focus on innovation-led growth, talent exchange, and market access.
The meeting focused on opportunities in renewable energy, including green hydrogen and sustainable industrial innovation.
Other potential areas of collaboration included marine biotechnology, aquaculture technologies, and AI applications across traditional industries.
According to the state IT minister, Karnataka is now a global hub for deep-tech, AI, biotech, aerospace, and advanced research, backed by one of the world’s strongest talent pipelines.
“As partners under the global innovation alliance, we must move beyond agreements on paper to actionable collaboration,” Kharge said.
“We are keen to work with Chile on startup exchanges, market access programmes, and building joint innovation corridors, including R&D centres, incubators, and accelerators. Chile’s position as a gateway to Latin America presents a significant opportunity for our startups to scale globally,” he added.
Officials said the engagement builds on the Letter of Intent signed between the Government of Karnataka and the Government of Chile during the Bengaluru Tech Summit, which established a framework for collaboration in startups, emerging technologies, research, and skill development under the Global Innovation Alliance.
Mackenna, Chile’s Minister of Foreign Affairs, said the country is actively advancing its transition toward a knowledge- and technology-driven economy.
“Our engagement with Karnataka reflects our interest in building strong innovation partnerships that enable technology exchange, talent collaboration, and access to dynamic startup ecosystems,” he added.
“We see significant potential to work together in sectors such as clean energy, digital technologies, and emerging industries, while also strengthening Chile’s role as a bridge between India and Latin America,” he said.
