Kerala to face Rs 8,000-10,000 cr annual revenue loss due to GST rate rationalisation: FM Balagopal

New Delhi, Sep 4 (PTI) Kerala is expected to face an annual revenue loss of Rs 8,000 crore to Rs 10,000 crore due to Goods and Services Tax (GST) rate cuts, state Finance Minister K N Balagopal said on Thursday.

His remarks come a day after the GST Council approved a two-rate structure -- 5 and 18 per cent -- a move that will bring down the prices of a large number of items. The revised structure will be in force from September 22.

Currently, there are four rate slabs -- 5, 12, 18 and 28 per cent.

At a media briefing in the national capital on Thursday, Balagopal, who is part of the ruling Left Democratic Front (LDF), made it clear that the state supports the GST rate cuts that will reduce prices but the central government should ensure that the rate cut benefits are passed on to the common man.

He also expressed concerns about the possibility of companies hiking prices of products before going for a price cut due to lower GST rates.

The minister said that compensation should be provided for states but the issue was not taken seriously during the GST Council meeting.

The state is expected to see an annual revenue loss of Rs 8,000 crore to Rs 10,000 crore due to the GST rate cuts, he said.

According to Balagopal, the annual revenue loss from four sectors -- cement, electronics, auto and insurance -- is estimated at Rs 2,500 crore.

There is a lack of clarity on the revenue impact on the state as well as the Union exchequer. For Kerala, he said the impact will be disproportionately severe compared to the national average as the state's consumption basket is heavily skewed towards higher rate items, the minister said.

Going by the past experiences, Balagopal said the rate rationalisation did not result in a commensurate reduction in consumer prices.

The financial implication of the rate rationalisation would be Rs 48,000 crore and this would be "fiscally sustainable for Centre and state", Revenue Secretary Arvind Shrivastava said on Wednesday.

Premium paid for individual life insurance and health insurance (including family floater), policies, too, have been exempted from GST.

The finance minister mentioned that there was no assurance that the benefits of the GST exemption related to insurance will be passed on to consumers.

Kerala had also demanded that the GST rate on lottery should be retained at 28 per cent and that the state-run paper lottery be kept out of the present proposal of rate rationalisation, wherein the rate has been increased to 40 per cent.

Lottery sales are a major revenue source for the state.

Against this backdrop, Balagopal has suggested that tax rates for paper lotteries should not be uniform across the country and instead, states should be allowed to fix the rate within their jurisdiction and retain the entirety of such revenue.

Balagopal also called for increasing the revenue share for states from the GST collection to 60 per cent.

Currently, the revenue-sharing ratio is 50:50 between the Centre and the states.

In his presentation to the GST Council, Balagopal mentioned that in November 2017, the rates of 178 items were reduced in a single stroke, which sharply lowered the average tax rate to 11.6 per cent and in the years that followed, several more rate reductions were effected, and with the current proposal, the average tax rate is expected to fall further.

"Despite assurances that GST would lead to economic buoyancy and increased consumption, thereby boosting revenues, such buoyancy has not materialised even after eight years of implementation," he claimed.

On Wednesday, Union Finance Minister Nirmala Sitharaman said all decisions at the GST Council were taken unanimously, with no disagreement with any state. PTI RAM MR