States should be compensated for revenue loss arising from GST rejig, says Kerala Finance Minister

Finance Minister K.N. Balagopal on Friday called for steps to make sure that the people genuinely benefit from the proposed Goods and Services Tax (GST) rate revision and State governments are adequately compensated for any revenue loss.

Speaking to reporters after attending a meeting of Ministers from non-BJP-ruled States in New Delhi, Mr. Balagopal said Kerala was not against the reduction in tax burden. But past experience has shown that companies and businesses have hogged the benefits of GST reforms.

“People should get the benefit of the tax cuts. At the same time, the revenues of the State government also need safeguards,” he said. The Ministers of the eight States who met today at the Karnataka Bhavan in New Delhi ahead of the GST Council meet on September 3 and 4 were unanimous in sharing this view, he said.

Mr. Balagopal reiterated his assessment that Kerala alone stood to lose over ₹8,000 crore in annual revenues due to the GST rate shake-up.

On the GST regime, Mr. Balagopal said Kerala should have received ₹52,500 crore in taxes last year, if the 14% annual hike in tax revenues were ensure since 2017. Instead, the receipts had stood at just ₹32,000 crore. Under the Value-Added Tax, Sales Tax regimes, Kerala’s tax receipts would have been ₹51,000 crore last year, he said.

Nothwithstanding the claim that both the Centre and States would see a dip in revenues owing to the GST revamp, in reality, the States stood to lose more, Mr. Balagopal said. While the Centre’s GST collections account for about 28% of its Own Tax Revenue, the States’ dependency on GST is much higher, he said. For the State governments it would be very difficult to pursue welfare measures and infrastructure development if their revenues are not protected, he said.