GST Reform: Opposition states demand 5-yr compensation for likely revenue loss
GST
Dated:- 29-8-2025
PTI
New Delhi, Aug 29 (PTI) Opposition-ruled states on Friday demanded that all states be compensated for 5 years for the likely Rs 2 lakh crore a year revenue loss due to the Centre's GST reform proposal.
Ministers from eight opposition-ruled states Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal also sought a mechanism to guard against profiteering by businesses post tax rate cut to ensure the benefits reach the common man.
The states suggested that an additional duty be levied on sin and luxury goods in addition to the proposed 40 per cent rate to maintain the current tax inc
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Briefing reporters after a meeting of the eight states, Karnataka Finance Minister Krishna Byre Gowda said each state is expected to lose 15-20 per cent from its current Goods and Services Tax (GST) revenue and debunked the claim that tax revenue buoyancy will increase after the rate cut.
“The 20 per cent GST revenue loss will seriously destabilise the fiscal structure of state governments across the country,” Byre Gowda said, adding that states should be compensated for 5 years which may be extended further till the revenues stabilise.
When GST was implemented, the revenue-neutral rate (RNR) was 14.4 per cent, but subsequent tax rate rationalisation has brought the net rate of taxation down to 11 per cent.
The current proposal by
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“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,” Byre Gowda said.
With the proposed GST rate rationalisation, Telangana is estimated to lose Rs 7,000 crore annually, Telangana Deputy Chief Minister Bhatti Vikramarka told reporters and asked the Centre to properly compensate states for the losses expected from the new tax measure.
Himachal Pradesh Technical Education Minister Rajesh Dharmani said, “We agree to the proposal of rate rationalisation, but we should be compensated as well.” There should be a separate slab for red-category manufacturing companies which adversely impact the environment, Dharmani added
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