GST reforms will have serious impact on State finances: K.N. Balagopal

Finance Minister K.N. Balagopal on Friday underscored the need to protect States against any revenue loss that the proposed Goods and Services Tax (GST) revamp entails.

The Minister said he anticipated a dip of ₹8,000 crore to ₹9,000 crore in Kerala’s GST revenues. He was inaugurating a round table organised by the Gulati Institute of Finance and Taxation (GIFT) and the Kerala State Planning Board on ‘The impact of U.S. penal tariff with a special focus on Kerala.’

At the national level, India’s GST revenues for the 2024-25 fiscal was pegged at ₹22.08 lakh crore. Mr. Balagopal said that, in his opinion, this revenue could dip by at least ₹4 lakh crore.

Kerala was not against the people enjoying the benefit of tax cuts. However, it needs to be discussed how the revenue loss to States are made up, Mr. Balagopal said. Also, past experience has shown that big companies, and not the people, are the beneficiaries of GST rate cuts. If States lose revenue, it affects the weaker sections of society. These are apprehensions are shared by all States, not just Kerala, Mr. Balagopal said.

The U.S. tariff policies and their impacts should not be viewed merely in the contexts of import and export tariffs, as they also have implications for domestic markets and production, he said, observing that the proposal for the GST slab revamp was chiefly the Centre’s response to the recent US tariff policies.

In Kerala’s case, the revenue loss will be most in the automobile and insurance sectors, he said. The GST tax slab revision for automobiles from 28% to 18% alone would cause a revenue loss to the tune of ₹1,100 crore, he said.

The method by which the U.S. has sought to reduce its trade deficit is by asserting US hegemony and its dominant position in the world economy, Planning Board Vice-Chairman V.K. Ramachandran, who chaired the round-table discussion, said. The U.S. is also using used the tariff regime to serve its geopolitical interests. In India’s case, this has been very evident and punitive, Dr. Ramachandran said.

Rajesh Agrawal, Commerce Secretary-designate, Government of India, former Union Cabinet secretary K.M. Chandrasekhar, Additional Chief Secretary (Finance) K.R. Jyothilal, Planning Board members R. Ramakumar and V. Namasivayam, GIFT director K.J. Joseph and registrar A. Saraf also spoke.