Kerala Faces Annual Revenue Loss of ₹8,000-10,000 Crore from GST Reforms

Kerala Faces Annual Revenue Loss of ₹8,000-10,000 Crore from GST Reforms

Kerala Finance Minister K.N. Balagopal stated that the recent Goods and Services Tax (GST) rate rationalization and reforms implemented by the Central Government are expected to cause a significant annual revenue loss to the state, estimated to be between ₹8,000 crore and ₹10,000 crore.

Key Concerns for State Revenue

• Impact of Rate Cuts: The revenue decline is a direct consequence of the Centre’s decision to simplify the GST structure and reduce tax rates on numerous goods and services. While these cuts aim to boost consumption and affordability, they immediately lower the tax collected per transaction, leading to a substantial deficit for the state.
• Fiscal Strain: The Minister highlighted that this massive revenue hit would put severe fiscal strain on Kerala’s finances, potentially impacting the state’s capacity to fund its welfare schemes and developmental projects.
• Demand for Compensation: Balagopal’s statement reinforces the demand made by Kerala and other states that the Central Government must devise a mechanism, or provide adequate compensation, to protect state revenues from the adverse financial impact of these national tax reforms.
• GST Compensation Cess End: The expiration of the GST compensation cess mechanism further exacerbates the state’s vulnerability to revenue shortfalls following tax rate reductions.