India’s eight opposition ruled states have asked the Central government to compensate for the revenue loss that might happen if the proposal to rationalize the goods and services tax (GST) structure is passed in the ongoing GST Council meeting being held on September 3 and 4, sources told Moneycontrol.
The states are Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal and Karnataka.
Earlier, in an interview to Moneycontrol on September 3, Jharkhand finance minister Radha Krishna Kishore said the state will agree to government’s GST rationalisation proposal if the Centre gives assurance of compensation.
"We'll approve the proposal of Centre only if they give assurance of compensation to us," Kishore had said before the 56th GST Council meeting.
The GST structure discussions are underway in a two-day deliberation on September 3 and 4.
The Jharkhand minister said that providing compensation is the ‘responsibility’ of the central government and demanded Rs 2,000 crore each year as annual compensation due to proposed changes.
According to Centre’s proposals, approved by the Group of Ministers, the new GST structure will have just two rates – 5 percent and 18 percent, dropping 12 percent and 28 percent slabs.
SBI Research sees states as 'net gainers' from GST 2.0 despite revenue loss anxiety
The move is likely to ease compliance concerns of businesses and cut prices of goods for consumers ahead of the festive season.
However, some states fear this could lead to revenue loss as some reports suggest that the changes could lead to an annual drop in GST collections by Rs 50,000 to Rs 55,000 crore.
The central government, however, is against the idea of a “compensation-cess framework”, Moneycontrol had reported on September 1.
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