GST Reform: Opposition-Run States Support Rate Cuts, Seek Safeguards Against Revenue Loss

A group of eight Opposition-run states on Friday supported reform through rate rationalisation in the Goods and Services Tax, but sought safeguards against potential revenue loss.

Minister and representatives of Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal attended a consultation on GST rate rationalisation in New Delhi.

"All Ministers and representatives present voiced serious concerns about the substantial revenue loss leading to disruption in social welfare programmes and developmental expenditures under the Union Government's current proposal. The tax reduction should be passed over to the common people and should not result in profiteering," according to a statement.

The GST Council is set to meet next week to discuss GST rate cuts and tweaks in the slab. The measures were announced by Prime Minister Narendra Modi during his Independence Day address.

"It was jointly decided to request the GST Council to place this matter on the agenda of the forthcoming GST Council meeting and to urge all other States, as well as the Union Government, to support this proposal," the statement said.

The statement further highlighted the potential loss in revenue arising from the implementation of GST rate rationalisation and the cessation of the compensation cess.

While the Central government has provided an estimate, the states cited projections from financial research institutions that range from Rs 85,000 crore to more than Rs 2 lakh crore per annum. The States anticipate significant revenue reduction ranging between 15 to 20% of the current GST revenues on account of the reforms.

"A comprehensive assessment and transparent communication are essential to enable States to evaluate the extent of revenue shortfalls and mitigate adverse effects on public expenditure and developmental commitments," they said.