Kerala CM urges PM Modi to compensate states for GST shortfall

Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan on Wednesday sought Prime Minister Narendra Modi’s immediate intervention to address the potential revenue loss states may suffer under the proposed Goods and Services Tax (GST) rate revision.

Vijayan said he had written to the prime minister, asking the Centre to assess Kerala’s likely shortfall and ensure adequate compensation as part of the reforms.

“The union government must consider the impact on states while revising GST rates,” the chief minister told reporters here. He pointed out that the existing 50:50 division of GST revenue between the Centre and states had already strained state finances.

The remarks came a day after Finance Minister K N Balagopal warned that Kerala could lose an additional ₹8,000–9,000 crore in tax revenues, calling the reform “the worst shock to public finances since Independence”.

Vijayan said Modi himself had announced on Independence Day that GST rates would be reviewed, with discussions already underway in the State Finance Ministers’ Committee ahead of a GST Council meeting.

While welcoming lower tax rates on essential items to ease the burden on ordinary people, the CM cautioned that sudden revenue losses would cripple welfare initiatives, including housing and insurance schemes for the poor.

“States already have limited revenue-mobilising capacity compared to their expenditure obligations in key socio-economic sectors,” he noted in his letter, stressing that restrictions on market borrowings further reduce resources.

He urged the Centre to put in place a mechanism to assess and compensate states for any shortfall once the new GST structure takes effect.