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The Union Government has acknowledged that the ongoing Goods and Services Tax (GST) rate rationalisation exercise could result in a significant net revenue loss for States, even after accounting for additional collections from higher tax slabs. Responding to a starred question in the Lok Sabha, Fin
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FAQ :
No, Finance Minister Nirmala Sitharaman has clarified that no proposal is currently under consideration to constitute a new GoM to address the initial revenue losses faced by states due to GST rate rationalisation.
Kerala has highlighted its vulnerability to revenue erosion due to its consumption-heavy profile, where a large share of goods attract higher GST rates. The state projects an annual revenue loss of around Rs 2,500 crore from specific sectors like automobiles and cement, with an overall potential loss exceeding Rs 8,000 crore.
The Centre estimates that goods shifted to the new 40% GST slab could generate an additional Rs 45,570 crore. However, the overall rationalisation exercise is projected to result in a gross negative revenue impact of about Rs 93,300 crore, leading to a net revenue loss of nearly Rs 47,700 crore.
The Finance Ministry cautions that these figures should not be viewed as final, as GST collections are dynamic and influenced by economic growth and compliance behaviour. Improved compliance and tax buoyancy over time may offset some revenue loss.
Kerala conducted its own assessment focusing on automobiles, insurance, cement, and electronics.
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