Finance ministers from eight states on Friday (August 29) supported the government’s proposal to rationalise goods and services tax (GST) rates but urged to safeguard state revenues, warning that repeated tax cuts had eroded their fiscal space.
In a press meeting, ministers from Kerala, Jharkhand, Tamil Nadu, Karnataka, Telangana, Punjab, Himachal Pradesh and West Bengal said the Centre should allow an additional levy for at least five years to compensate for revenue losses from the proposed overhaul.
State ministers express concerns on GST 2.0
Kerala Finance Minister KN Balagopal said states had collectively lost about ₹22,000 crore compared to pre-GST collections, while Jharkhand’s Radha Krishan Kishore argued that the system had weakened the finances of manufacturing states.
Karnataka Revenue Minister Krishna Byre Gowda said 71% of revenue losses were borne by states, noting, “Every round of rate reduction has resulted in a net loss to states, while the Centre has other revenue sources.”
Gowda suggested replacing the cess with an additional levy on sin goods, covering the gap between current rates and the 40% ceiling, to be imposed for five years or until revenues stabilise.
Safeguards against windfall gains for companies
Himachal Pradesh’s Minister for Technical Education Rajesh Dharmani said GST rationalisation must not translate into windfall profits for companies. He proposed an “eco-services” mechanism and a separate slab for red-category industries that damage the environment.
States complain about revenues dropping by 25% after GST
Punjab Finance Minister Harpal Singh Cheema said states’ revenues had fallen by about 25% since GST was introduced, with Punjab alone losing ₹1.11 lakh crore in eight years.
“All states, BJP or otherwise, are struggling to raise revenues while companies’ profits and inflation rise. BJP states are unable to speak openly but have conveyed the same concerns,” he added.
The ministers also flagged that while the compensation cess ended in 2022, GST revenues is yet to stabilise.
