New Delhi, Jun 15 (PTI)  - Karnataka Chief Minister H D Kumaraswamy Saturday asked the Centre to extend GST compensation beyond five years, saying that the state will face "severe financial crunch" after the recompense period ends in 2022.

He was speaking at the first meeting of the Governing Council of Niti Aayog chaired by Prime Minister Narendra Modi here.

While implementing the Goods and Services Tax (GST), the Centre had assured the states to compensate them for loss of their revenue for five years till 2022.

"While the revenue gap is being bridged by the assured compensation till 2022, the state has limited scope to mobilise additional revenue thereafter," Kumaraswamay said.

It is evident that at the end of 2022-23, there would be a steep fall in revenues of the state as compared to the protected revenue of 2021-22 which would have accrued to the state due to the constitutionally guaranteed compensation, he said.

"This would adversely impact developmental and other infrastructural projects implemented in the state as well as committed expenditure of the state government.

"Thus, in case this revenue gap is not bridged in the coming years despite all compliance efforts, adequate compensation, in the manner as envisaged in the Compensation Act, should be extended beyond 2022," he added.

Stating that Karnataka is the most arid state in the country after Rajasthan, the Chief Minister said the state "faces serious drinking water challenges. Ground water table is depleting and ground water sources are getting contaminated." 

He urged the prime minister to significantly increase the allocation to rural drinking water sector.

Karnataka is investing ₹ 2,800 crore during 2019-20 for rural drinking water, of which the centre's share is only ₹ 400 crore, he added.

The chief minister also urged the Centre to approve ₹ 2,064 crore relief from the National Disaster Relief Fund (NDRF) for damage to crops in the 2018-19 rabi season.

He also urged the prime minister to release pending ₹ 1,500 crore reimbursement under the MGNREGA scheme and raise the fund allocation under the scheme to ensure MGNREGA workers are not subjected to hardship due to delays in payment of wages.

On the ranking system adopted by NITI Aayog, Kumaraswamy said it should be more participative, scientific and transparent.

"For example, giving 58th rank to Bengaluru in Ease of Living Index is unacceptable as Bengaluru is widely rated as the most preferred city for work in the country by reputed agencies," he said.

GST compensation extension needed to prevent state revenue shortfall and protect developmental spending after the compensation period. The Chief Minister requests extension of GST compensation beyond 2022 under the Compensation Act to prevent a projected state revenue shortfall that would reduce protected revenue, constrain revenue mobilisation and jeopardise developmental and committed expenditures; he also seeks increased central funding for rural drinking water, approval of NDRF crop-relief, and release and augmentation of reimbursements under the rural employment guarantee scheme to avoid wage-payment hardships.