Kerala Seeks Revenue Protection, Flags ₹8,000-₹10,000 Crore Loss from GST Rate Rejig

Quick Summary

• Kerala reiterated it’s demand at the GST council meeting for protecting States’ revenue under the revamped GST structure.
• Kerala Finance Minister K.N.Balagopal stated that the State could face a dip in annual revenue by ₹8,000 crore to ₹10,000 crore due to tax changes, with sectors like automobiles and cement losing approximately ₹2,500 crore.
• the Centre sees less impact due to alternate income sources; though,States rely primarily on GST revenues.
• Kerala registered its protest over lack of focus from the Centre and GST council on revenue protection for States.
• The State proposed revising the Centre-State revenue-sharing ratio to 60:40 in favor of States.
• Concerns raised over ensuring rate cuts benefit end-consumers; past experiences suggest companies may hike prices instead of passing benefits along.
• Objections were made against increasing tax on paper lottery tickets to 40%, citing dependence of over 2 lakh livelihoods on this sector.
• Kerala shared data showing decreased earnings under GST compared to a pre-GST system.

Indian Opinion Analysis

The financial concerns expressed by Kerala highlight broader challenges faced by Indian states under the evolving GST framework. A potential reduction in critical state revenues may disrupt budgets allocated for essential public welfare programs like pensions and social security measures. this raises questions about whether existing compensatory mechanisms are sufficient or require recalibration.Kerala’s call for revising revenue sharing and monitoring consumer benefits reflects practical approaches aimed at balancing state fiscal stability alongside public interest goals. However, systemic issues such as market manipulation-companies absorbing rate cuts without reducing prices-remain a significant challenge that requires stricter enforcement mechanisms.

The disagreement surrounding lottery taxes illustrates tensions between protecting specific economic activities versus broader taxation policies. Striking an equitable balance between state-specific demands and cohesive national strategies will likely shape future discussions within India’s cooperative federalism framework.

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