Systemic issues in the Integrated Goods and Services Tax (IGST) settlement mechanism has cost Kerala ₹956.16 crore, according to the Finance department.

Finance Minister K.N. Balagopal said here on Wednesday that the Centre slashed IGST shares of all States on the grounds that excess amounts had been credited to them. Under this decision, Kerala’s IGST share was reduced by ₹956.16 crore. However, there was a lack of clarity regarding the excess settlements, he said.

Levied on the interstate supply of goods and services, IGST is collected by the Centre. The accounts are settled periodically and the revenue is shared between the Centre and the States. In July 2024, the Kerala Public Expenditure Review Committee had advised the Kerala government to closely monitor IGST inflow as the present system resulted in revenue loss for it.

Talking to reporters here, Mr. Balagopal alleged that the Centre also slashed ₹3,300 crore from the State’s borrowing limit in the name of the Guarantee Redemption Fund. The Centre had set a condition that a corpus equivalent to 5% of the government guarantee to financial institutions should be set aside for the fund. Failure to do so would result in a reduction from its borrowing limit equivalent to 0.25% of the GSDP.

The open market borrowing limit of the State for the first nine months of the 2025-26 fiscal (April-December) had been pegged at ₹29,529 crore.

On the charge that Kerala was plunging towards a debt trap, Mr. Balagopal said that the debt-GSDP ratio of the State had in fact witnessed a steady decrease since 2020-21 from 38.47% to 33.9% in 2024-25.

Replying to a question, Mr. Balagopal said formal discussion had not been held yet on the formation of the new pay revision commission.