Thiruvananthapuram | Kerala Chief Minister Pinarayi Vijayan on Wednesday sought the immediate intervention of Prime Minister Narendra Modi to address the concerns of states that may face revenue loss when the Centre revises the GST rate structure.
Vijayan urged the union government and the prime minister to assess Kerala's likely revenue loss and provide compensation as part of the proposed GST reforms. He said he had already written to Modi highlighting the state's concerns.
"The union government needs to address the concerns of states facing revenue loss while revising GST rates," he told reporters here.
The chief minister said the 50:50 division of GST revenue between the Centre and states has resulted in a shortfall for state governments.
His remarks came a day after state Finance Minister K N Balagopal warned that the proposed reforms could have the “worst impact on public finances since Independence.” Vijayan recalled Modi's Independence Day announcement on reviewing the GST rate structure and noted that discussions were already underway in the State Finance Ministers' Committee. A GST Council meeting is expected soon, he added.
"There is great concern about the revenue loss to the state once the GST rate revision is implemented," Vijayan said.
He, however, welcomed any measure that would ease the burden on the common people by cutting taxes on essential items.
“The loss of revenue to states will hamper welfare initiatives for the poor and vulnerable. Therefore, states must be compensated,” he said.
In his latest letter to the PM, Vijayan, without specifying the date, also urged that the benefits of lower tax rates be passed on to consumers through reduced prices of commodities and services.
He pointed out that the revenue-mobilising capacity of states is already limited compared to their expenditure obligations in key socio-economic sectors, and that restrictions on open market borrowings further constrain resource mobilisation.
“In these circumstances, sudden revenue loss due to GST rate revision will further weaken states' finances. Necessary steps should be taken to assess and compensate for the loss,” he stressed.
“Therefore, immediate steps must be taken to assess the state's revenue loss while revising the GST rate,” he said.
He added that a mechanism should be instituted to ensure adequate compensation and, through his letter, sought the prime minister's immediate intervention.
Balagopal, on Tuesday, said Kerala could face an additional shortfall of Rs 8,000-9,000 crore in tax revenues on top of existing losses.
He warned that such a dip "could adversely affect several social welfare measures", including the LIFE housing project and the government's free insurance scheme, which currently benefits over 42 lakh families.
