Opposition-ruled states on Friday said the Centre’s proposal to restructure Goods and Services Tax (GST) rates could lead to losses of Rs 1.5–2 lakh crore and sought a clear mechanism for compensation. They plan to raise the issue at the GST Council meeting on September 3 and 4.
Finance ministers from Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal met to frame a joint proposal. They suggested that an additional duty be imposed on sin and luxury goods, over and above the proposed 40 per cent rate, to balance revenue loss. The proceeds, they said, should be shared with the states.
Karnataka Finance Minister Krishna Byre Gowda said states could lose 15–20 per cent of their GST revenues under the new structure. “The 20 per cent GST revenue loss will seriously destabilise the fiscal structure of state governments across the country,” he said, adding that states should be compensated for five years until revenues stabilise.
Byre Gowda recalled that the revenue-neutral rate (RNR) at the time of GST rollout was 14.4 per cent, which later fell to 11 per cent after rationalisation. He warned that the Centre’s proposal to reduce slabs and rates could further bring down the net rate to 10 per cent. “States' revenue interest should be protected. If there is a serious loss to state government revenues, people will be impacted, development work will be impacted and insufficient revenue will hurt state autonomy as well,” he said.
The Centre has suggested moving to a two-slab structure of 5 per cent and 18 per cent, replacing the current four slabs of 5, 12, 18 and 28 per cent plus cess. A 40 per cent rate would apply only to sin and ultra-luxury goods.
Himachal Pradesh Technical Education Minister Rajesh Dharmani said, “We agree to the proposal of rate rationalisation, but we should be compensated as well.”
Punjab Finance Minister Harpal Singh Cheema demanded that a mechanism be created to monitor profiteering so that consumers benefit from lower tax rates.
The states also proposed that the base year for calculating revenue protection be set as 2024–25. “Should there be a deficit even after the imposition of the proposed additional levy (on sin and luxury goods), the union government should raise loans secured against the future receipts of the additional levy,” their joint statement said.
with PTI inputs
Finance ministers from Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal met to frame a joint proposal. They suggested that an additional duty be imposed on sin and luxury goods, over and above the proposed 40 per cent rate, to balance revenue loss. The proceeds, they said, should be shared with the states.
Karnataka Finance Minister Krishna Byre Gowda said states could lose 15–20 per cent of their GST revenues under the new structure. “The 20 per cent GST revenue loss will seriously destabilise the fiscal structure of state governments across the country,” he said, adding that states should be compensated for five years until revenues stabilise.
Byre Gowda recalled that the revenue-neutral rate (RNR) at the time of GST rollout was 14.4 per cent, which later fell to 11 per cent after rationalisation. He warned that the Centre’s proposal to reduce slabs and rates could further bring down the net rate to 10 per cent. “States' revenue interest should be protected. If there is a serious loss to state government revenues, people will be impacted, development work will be impacted and insufficient revenue will hurt state autonomy as well,” he said.
The Centre has suggested moving to a two-slab structure of 5 per cent and 18 per cent, replacing the current four slabs of 5, 12, 18 and 28 per cent plus cess. A 40 per cent rate would apply only to sin and ultra-luxury goods.
Himachal Pradesh Technical Education Minister Rajesh Dharmani said, “We agree to the proposal of rate rationalisation, but we should be compensated as well.”
Punjab Finance Minister Harpal Singh Cheema demanded that a mechanism be created to monitor profiteering so that consumers benefit from lower tax rates.
The states also proposed that the base year for calculating revenue protection be set as 2024–25. “Should there be a deficit even after the imposition of the proposed additional levy (on sin and luxury goods), the union government should raise loans secured against the future receipts of the additional levy,” their joint statement said.
with PTI inputs
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