GST rate rejig: Centre pegs revenue implication at ₹48,000 crore; states fear bigger hit

The Goods and Services Tax (GST) rate rationalisation will have a revenue implication of about ₹48,000 crore, Revenue Secretary Arvind Shrivastava said on Wednesday, stressing that it would be “incorrect” to term it a loss.

His remarks came amid concerns voiced by several opposition-ruled states at the 56th GST Council meeting over the impact of the rate cuts on their fiscal health.

Earlier in the day, finance ministers of eight opposition-ruled states — Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal — met separately to formalise their joint strategy and reiterated the demand that all states be compensated for revenue losses incurred due to the rejig.

Kerala Finance Minister K N Balagopal said his state could face an annual revenue loss of ₹8,000–10,000 crore. According to Balagopal, the annual revenue loss from cement, electronics, auto and insurance is estimated at ₹2,500 crore.

Tamil Nadu Finance Minister Thangam Thennarasu welcomed the reforms, including exemptions for individual health and life insurance, but expressed concerns about safeguarding state revenue. He suggested either to continue the present dispensation of Cess provision through constitutional amendment or to increase the bound rate of tax only for sin and luxury goods through GST Act amendment.

Jharkhand Finance Minister Radhakrishna Kishore pegged his state’s potential annual loss at ₹2,000 crore, mainly in automobiles, cement and manufacturing. He said the state has already lost ₹16,408 crore since the introduction of GST and projected a cumulative hit of about ₹61,670 crore by 2029.

Jammu and Kashmir Chief Minister Omar Abdullah said the UT could see a 10–12% fall in revenues due to the proposed reforms, compounding its fiscal crisis in the aftermath of the Pahalgam terror attack.

Under the existing GST structure, the 18% slab contributes around 65% of total collections, while the 5% slab accounts for 7%, the 28% slab for 11%, and the 12% slab for 5%.

A report by SBI Research said historical trends indicate that tax rate rationalisation boosts revenues after a brief adjustment phase. It projected that states will remain “net gainers” under the new regime, estimating at least ₹10 lakh crore in State GST collections and ₹4.1 lakh crore from devolution in FY26.

SBI Research forecast a ₹50,000 crore surplus in the compensation fund this year, which could help offset any short-term shortfalls from rate rationalisation.