Eight opposition-ruled states in India are demanding compensation from the central government for potential revenue losses under a proposed new GST structure.
The states—Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal, and Karnataka—are concerned that the government’s plan to reduce the number of GST slabs from four to two (5% and 18%) will decrease their tax revenue. Some reports suggest this could lead to an annual drop in collections of up to ₹55,000 crore.
Jharkhand’s finance minister, Radha Krishna Kishore, stated his state would only approve the changes if the Centre guarantees compensation, specifically requesting ₹2,000 crore annually.
While the central government is reportedly against a “compensation-cess framework,” a report by SBI Research suggests states would be “net gainers” in the long run. The report argues that while there may be an initial dip, increased consumption from lower prices will lead to a rebound in revenue. It also points out that a surplus in the existing compensation fund could be used to cover any initial losses.