States fear GST loss; rejig to fuel spending, growth

GST reform to cool inflation, lift growth, but non-BJP states flag revenue loss

- Rhik Kundu, Subhash Narayan & Gireesh Chandra Prasad

States upset by revenue loss from tax cuts have pressed the Centre to make good their losses, a day after the Goods and Services Taxes Council pulled off the biggest overhaul of the indirect tax regime.

Eight states ruled by non-Bharatiya Janata Party (BJP) parties have urged the Centre to set up a group of ministers to study revenue losses and explore possible compensation mechanisms, said Rajesh Dharmani, Himachal Pradesh's town and country planning minister. Dharmani, who represented the state at the GST Council said revenue protection is critical for states in view of mounting fiscal pressures.

"As far as the goods and services tax (GST) rationalization is concerned, there was no difference of opinion at all; all states supported it," he said.

Ministers from Kerala, Tamil Nadu, Telangana, Karnataka, Punjab, Himachal Pradesh, West Bengal, and Jharkhand have repeatedly asked the Centre to compensate them for the losses, citing annual losses of ₹50,000 crore, even as commerce minister Piyush Goyal urged the industry to pass on the full benefits of the GST rate reductions to the consumers.

Speaking at an industry event, Goyal termed the GST restructure the "biggest ever reform" since India's independence, adding it would boost demand in almost all sectors, supporting the economic growth of the country.