Kerala FM Balagopal warns of revenue loss as new GST rates come into effect

Thiruvananthapuram, Sep 22
Kerala Finance Minister K.N. Balagopal on Monday said that states, including Kerala, had fully participated in the GST Council’s recent decision to restructure tax slabs, but warned that the reforms could lead to significant revenue loss for states.

The new GST regime, effective from Monday, introduces just two tax slabs -- 5 per cent and 18 per cent.

According to the Union government, nearly 99 per cent of goods will now fall under the 5 per cent bracket.

Milk products, ghee, butter, paneer, and ice cream are among the items that have seen price reductions, with the Kerala Cooperative Milk Marketing Federation (Milma) announcing revised prices from Monday. A litre of Milma ghee will cost Rs 45 less, while 400 grams of butter will see a price cut of Rs 15. Paneer and ice cream will also be cheaper.

However, Minister Balagopal cautioned that the benefits of tax cuts do not always reach consumers, as many companies fail to pass them on.

“Even Union Ministers admitted this concern. After a few months, prices may return to previous levels. There has been no proper study to assess the long-term impact of these reforms,” he said.

He further noted that Kerala could lose anywhere between Rs 50,000 crore and Rs two lakh crore annually.

“If states lose this much revenue in a year, it will directly affect welfare pensions, salaries, and development projects. States do not have alternate revenue sources, and about 41 per cent of their total income comes from GST. Without this, the financial crisis will deepen,” Balagopal said, adding that only if people continue to receive salaries can they benefit from lower prices.

Meanwhile, Kerala’s Finance Department clarified that although GST on lotteries has been increased from 28 per cent to 40 per cent, ticket prices will remain unchanged. Instead, adjustments will be made in prize distribution and agent commissions, with commission rates set to undergo a sharp reduction.

The government has also announced that strict monitoring will continue to ensure that consumers actually benefit from reduced GST rates in the market.