Kerala faces ₹9,000 crore GST hit: CM Vijayan appeals to PM Modi
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Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan on Wednesday sought the immediate intervention of Prime Minister Narendra Modi to address the concerns of states likely to suffer revenue loss following the Centre’s proposed revision of the Goods and Services Tax (GST) rate structure.
Vijayan urged the Union government and the prime minister to assess Kerala’s potential revenue shortfall and provide adequate compensation as part of the 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,” Vijayan told reporters here.
Pointing out that the 50:50 division of GST revenue between the Centre and states has already led to financial shortfalls for state governments, the chief minister expressed apprehension that the upcoming changes would further strain Kerala’s finances.
His remarks followed state Finance Minister K N Balagopal’s warning a day earlier that the reforms could trigger the “worst impact on public finances since Independence.” Vijayan also referred to Modi’s Independence Day announcement on reviewing the GST rate structure and noted that discussions were already progressing in the State Finance Ministers’ Committee, with a GST Council meeting expected soon.
“There is great concern about the revenue loss to the state once the GST rate revision is implemented,” Vijayan said. At the same time, he welcomed any step that would ease the burden on common people by reducing taxes on essential commodities.
“The loss of revenue to states will hamper welfare initiatives for the poor and vulnerable. Therefore, states must be compensated,” he asserted.
In his latest letter to the prime minister, Vijayan – without specifying the date – also urged that the benefits of lower tax rates be directly passed on to consumers through reduced prices of goods and services.
The chief minister further highlighted that the revenue-mobilising capacity of states is already limited compared to their heavy expenditure commitments in vital socio-economic sectors. Additional restrictions on open market borrowings, he added, have further constrained their 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,” Vijayan emphasised. “Therefore, immediate measures must be put in place to assess the state’s revenue loss while revising GST rates,” he said, stressing the need for a proper mechanism to ensure adequate compensation.
Finance Minister Balagopal, on Tuesday, warned that Kerala could face an additional shortfall of ₹8,000–9,000 crore in tax revenues, on top of its existing losses. He cautioned that such a decline “could adversely affect several social welfare measures,” including the state’s flagship LIFE housing project and the free insurance scheme that currently benefits over 42 lakh families.
With PTI inputs
