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Kerala is likely to experience an annual revenue loss of INR 8,000-10,000 crore following the GST rate cuts, according to state Finance Minister Shri K N Balagopal. While the state supports the cuts to lower consumer prices, Balagopal emphasized that the central government must ensure these benefits reach the public. Key sectors including cement, electronics, automobiles, and insurance are expected to contribute to the revenue shortfall. The new GST structure simplifies rates to 5% and 18%, impacting personal-use and aspirational goods, as well as life and health insurance premiums.
Kerala is expected to face an annual revenue shortfall of INR 8,000-10,000 crore due to the recent Goods and Services Tax (GST) rate cuts, state Finance Minister Shri K N Balagopal said earlier this week. He clarified that while the state supports the reduction in rates, which is intended to reduce prices for consumers, the central government should ensure that the benefits are actually passed on to the general public. Advertisement
The GST Council recently approved a simplified two-rate structure of 5% and 18%, replacing the earlier four slabs of 5%, 12%, 18%, and 28%. At a media briefing in the national capital, Balagopal mentioned that although compensation for states was discussed, the issue did not receive sufficient attention during the GST Council meeting.
The finance minister highlighted that four major sectors cement, electronics, automobiles, and insurance are expected to contribute around INR 2,500 crore to the overall revenue loss. Many personal-use items and aspirational goods for the middle class, such as air conditioners and washing machines, will now attract lower GST. Additionally, premiums paid for individual life insurance and health insurance policies, including family floater plans, have been exempted from GST.
Union Finance Minister Smt Nirmala Sitharaman stated that all decisions at the GST Council were taken unanimously, with no disagreement from any state. Revenue Secretary Arvind Shrivastava added that the financial implication of the rate rationalization would amount to INR 48,000 crore and is considered fiscally sustainable for both the central and state governments.
Balagopal also underlined the importance of ensuring that these tax reductions directly benefit consumers. He emphasized that without proper monitoring, there is a risk that the reduced GST rates may not be fully reflected in retail prices. He also reiterated that state governments must be adequately compensated for the revenue losses caused by the changes.
The GST rate cuts will affect a wide range of products, including almost all items used for personal purposes and several aspirational goods commonly purchased by the middle class. By exempting life and health insurance premiums, the Council aims to make essential financial protection products more affordable. This is expected to provide some relief to households while encouraging responsible consumer spending.
Source: PTI
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