Kerala faces ₹8,000–₹9,000 cr annual loss under new GST structure: KN Balagopal

Thiruvananthapuram: Finance Minister K N Balagopal has warned that Kerala could lose ₹8,000–₹9,000 crore in annual revenue if the proposed GST rate cuts are implemented. He also cautioned that the new structure could result in a reduction of up to ₹4 lakh crore in the country’s overall GST revenue.

Speaking at a round-table discussion organised by the Gulati Institute of Finance and Taxation (GIFT) on the topic ‘How Increased Tariffs Will Impact Kerala’s Economy’, Balagopal said the move to reduce GST slabs was a fallout of the 50 per cent tariff imposed on India by the United States.

The GST Council has proposed a shift from the current four-slab system introduced in 2017 to two main rates of 5 per cent and 18 per cent, along with a steep 40 per cent slab for luxury and sin goods. Following this, the GoM of state ministers accepted the Centre's proposal to move to a two-slab structure.

Balagopal said that the proposal would further strain Kerala's financial position, as a large share of the state's trade falls under the 18 per cent and 28 per cent GST slabs. He said the automobile sector alone could face a revenue loss of ₹1,100 crore, while the insurance sector is expected to lose around ₹500 crore.

He also urged the Centre to introduce measures to cover the losses that the states may face under the revised GST structure, similar to the previous compensation scheme. "States like Kerala, which allocate substantial funds for welfare programmes, will be the worst affected by the revenue shortfall," he said.

The minister noted that lowering GST rates would not necessarily result in price reductions for consumers. A special study by the state GST department on 25 products found that the benefits of the tax cuts were being absorbed by large corporations rather than passed on to buyers.

Balagopal warned that US President Donald Trump's decision to impose a 50 per cent tariff on Indian goods would severely impact Kerala, particularly in sectors such as marine products, spices, tea, coffee, and coir. Kerala contributes 12 per cent of India’s seafood exports, valued at around ₹7,000 crore. The tariff hike could trigger a sharp decline in seafood prices and result in significant job losses among workers, he cautioned.

State Planning Board Vice-Chairman V Ramachandran presided over the function. Additional Chief Secretary K R Jyothilal, former Cabinet Secretary K M Chandrasekhar, Rajesh Agarwal (nominated for the post of Union Commerce Secretary), and State Planning Board member R Ramakumar also spoke during the discussion. GIFT Director K J Joseph delivered the welcome address, and Registrar Dr A Saraf proposed the vote of thanks.