GST Rationalisation To Result In Rs 47,700 Cr Loss To States
“Taken together, these two figures are likely to result in about Rs. 47,700 Crore of net negative": The Finance Ministry
CHENNAI: GST rationalisation is likely to result in net negative impact of about Rs 47,700 crore to the states, finds the government. However, the impact will not be static due to tax buoyancy and increased compliance.
The broader rate rationalization initiative is expected to lead to a negative revenue implication of around Rs 93,300 crore to the states. Based on the data of consumption patterns and the entire value chain for the period 2023-24, the items that moved from the 28 per cent to the 40 per cent tax bracket are projected to account for additional revenue of approximately Rs. 45,570 crore.
“Taken together, these two figures are likely to result in about Rs. 47,700 Crore of net negative,” the Finance Ministry informed the House.
“However, these figures should not be viewed as definitive since tax collection is not static and there is buoyancy. Moreover, lower rates are likely to lead to improved compliance and fewer disputes,” it added.
The Centre is not likely to constitute a new Group of Ministers to address the issues of initial revenue losses incurred by the states due to the rate rationalization under the GST reforms.
Replying to a query, the government said that the consumption pattern in Kerala is such that the majority of the items consumed attract a higher rate of tax. Therefore, the revenue loss to the state on account of the rate rationalization is likely to be relatively higher.
Kerala had undertaken its own estimates of the potential revenue loss arising on account of GST rate rationalisation by focusing on four sectors - automobiles, insurance, cement and electronics. As per their estimates, from these sectors, the State expected to lose around Rs 2,500 crore annually and the total annual revenue loss is likely to be more than Rs 8,000 crore for Kerala.