'Centre ignoring Kerala's revenue loss'; Minister Balagopal protests at GST Council meet

NEW DELHI: Kerala Finance Minister K.N. Balagopal has accused the central government of ignoring the state’s concerns over the massive revenue loss expected from the recent GST revision. According to him, the state may lose between Rs 8,000 and Rs 10,000 crore annually. Balagopal said the Centre refused to engage in a meaningful discussion during the latest GST Council meeting and failed to provide clarity on how the shortfall would be compensated. Kerala officially registered its protest in the council, where a heated debate took place.

"We went with hope, but it felt like a blow to the head," Balagopal said in Delhi. While the Centre maintained that only a minor loss was likely, Kerala pressed for permission to impose a cess at the state level and demanded that revenue sharing be revised to 60% for the Centre and 40% for the states. Despite these difficulties, the state managed to ensure a fulfilling Onam and control price rise, he added.

Central intervention essential
Balagopal stressed that central government intervention is essential to overcome the revenue loss. Kerala will lose Rs 900 crore from the insurance sector alone. GST changes in cement, automobiles, and electronics will cause a loss of over Rs 2,500 crore. There are no clear figures on how much the Centre and states will lose. Even BJP-ruled states will be affected. If the old tax system had continued instead of GST, Kerala would have earned 40–50% more revenue, Balagopal claimed.

Lottery issue ignored
The increase in GST on lottery from 28% to 40% will mainly affect Kerala and West Bengal, as only these states run paper lotteries. In Kerala, the lottery business is run by the government itself. More than half of this revenue has to be handed over to the Centre. Kerala demanded either to keep the tax at 28% or to allow lottery tax revenue to go directly to states. But the Centre refused to listen.

Companies should not exploit
When taxes are reduced, companies may increase product prices. This must be strictly monitored. Cement companies have already started moves to increase prices by Rs 30. The benefit of tax cuts for the public is being taken away by such price hikes, Balagopal said.

Compensation cess issue
Luxury products like tobacco, luxury cars, and high-end bikes are already taxed at 40%, including a special compensation cess. However, states do not benefit from this cess, as the revenue goes directly to the Centre. By October, the compensation cess itself will end, and the Centre has not clarified what system will replace it.