Could Kerala FM Balagopal's Warning Signal Revenue Loss Due to New GST Rates?
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Synopsis
Kerala's Finance Minister K.N. Balagopal has raised alarms about the potential revenue losses states may face due to the recent GST tax slab changes. With a new GST framework in place, this could have far-reaching impacts on welfare and development.
Key Takeaways
- Kerala Finance Minister warns of potential revenue losses.
- New GST framework features only two tax slabs.
- Many goods will fall under the 5 percent GST category.
- Price reductions for various dairy products.
- Concerns over companies passing on tax cuts to consumers.
Thiruvananthapuram, Sep 22 (NationPress) Kerala's Finance Minister K.N. Balagopal expressed concerns on Monday about the implications of the GST Council's recent tax slab restructuring, indicating that states, including Kerala, participated fully in the process. However, he cautioned that these reforms might result in considerable revenue losses for the states.
The revised GST framework, effective from Monday, introduces only two tax slabs: 5 percent and 18 percent.
According to the central government, approximately 99 percent of goods will now be classified under the 5 percent category.
Items such as milk products, ghee, butter, paneer, and ice cream have witnessed price drops, with the Kerala Cooperative Milk Marketing Federation (Milma) announcing new rates starting Monday. A litre of Milma ghee will now cost Rs 45 less, and 400 grams of butter will see a reduction of Rs 15. Prices for paneer and ice cream will also decrease.
Nonetheless, Minister Balagopal warned that the advantages of these tax reductions may not translate to consumer savings, as many businesses do not pass on the savings.
“Even Union Ministers have acknowledged this issue. Prices might revert to previous levels after a few months. There has been a lack of thorough studies to understand the long-term effects of these reforms,” he stated.
He further elaborated that Kerala could face annual losses ranging from Rs 50,000 crore to Rs two lakh crore.
“If states suffer this much revenue loss yearly, it will directly impact welfare pensions, salaries, and development initiatives. States lack alternative revenue streams, and approximately 41 percent of their total income is derived from GST. Without this revenue, the financial crisis will worsen,” Balagopal emphasized, noting that only if individuals continue to receive salaries can they reap the benefits of lower prices.
Additionally, the Finance Department of Kerala clarified that while the GST on lotteries has increased from 28 percent to 40 percent, ticket prices will remain stable. Adjustments will be made in prize distribution and agent commissions, which will see significant cuts.
The government has committed to stringent monitoring to ensure consumers genuinely benefit from the lowered GST rates in the marketplace.
Point of View
It’s crucial to understand the potential impact on state revenues. The caution expressed by Kerala's Finance Minister highlights the concerns shared by many states. While tax reforms aim to simplify the system, their effectiveness in delivering real benefits to consumers remains to be seen.
NationPress
22/09/2025
Frequently Asked Questions
What are the new GST tax slabs introduced?
The new GST regime has introduced two tax slabs: 5 percent and 18 percent.
How much revenue loss is Kerala projected to face?
Kerala could potentially lose between Rs 50,000 crore and Rs two lakh crore annually due to the new GST rates.
Will consumers see a reduction in prices due to the new GST rates?
While some items have seen price reductions, Minister Balagopal cautioned that not all companies pass on these tax benefits to consumers.
What has changed regarding GST on lotteries?
The GST on lotteries has increased from 28 percent to 40 percent, but ticket prices will remain unchanged.
How is the government ensuring that consumers benefit from lower GST rates?
The government has committed to strict monitoring to ensure that consumers genuinely benefit from the reduced GST rates.
