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Kerala has informed the 16th Finance Commission that the state may face a revenue shortfall of INR 8,000 to 10,000 crore due to the GST rate rationalisation that introduces two slabs of 5 per cent and 18 per cent later this month. Of this, about INR 6,300 crore is linked to goods tax, while INR 2,500 crore is expected from losses in the export sector because of higher US tariffs. The state has requested compensation and highlighted its declining share in the divisible pool, which has dropped from 3.87 per cent to 1.92 per cent over successive Commissions.
Kerala's Finance Minister K. N. Balagopal met members of the 16th Finance Commission in New Delhi and explained the state's likely revenue loss due to the upcoming Goods and Services Tax (GST) rate rationalisation. The GST Council recently approved a simplified two-rate structure of 5 per cent and 18 per cent, which will take effect later this month. Advertisement
Kerala has supported the change but pointed out that it could bring down the state's annual revenues by INR 8,000 to 10,000 crore, with the loss from goods tax alone expected at around INR 6,300 crore. Balagopal handed over a supplementary memorandum to the Commission and asked for compensation to offset the impact.
He also drew attention to the effect of higher US tariffs on Kerala's export sector, especially marine products and spices, which are expected to cause an additional revenue loss of about INR 2,500 crore.
The minister stressed that the fall in revenues will place added pressure on Kerala's finances. He also highlighted the state's declining share from the divisible tax pool, which was 3.87 per cent under the 10th Finance Commission but dropped to 1.92 per cent in the 15th Finance Commission period. Kerala has been raising concerns over this reduction for many years. Balagopal said development policies should not work against states and urged that Kerala should receive fair treatment.
The meeting was attended by Finance Commission Chairman Arvind Panagariya along with members Annie George Mathew, Manoj Panda, T. Rabi Sankar, and Soumya Kanti Ghosh. The Commission is preparing its report, which is due to be submitted to the Centre by the end of October. Its recommendations will decide how tax revenues are shared between the Union government and the states.
Source PTI
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