Reforms in the Goods and Services Tax (GST) regime with charge charge rationalisation is a welcome transfer, but State governments are involved with the influence of the identical on the revenues accruing to them, in accordance with Karnataka Revenue Minister Krishna Byre Gowda.
Speaking to The Hindu, Mr. Gowda, who can also be a member of the Group of Ministers (GoM) on charge rationalisation, stated that the influence of the Centre’s proposals need to be fastidiously assessed. A significant overhaul of GST was introduced by Prime Minister Narendra Modi throughout his independence day deal with, with a flat two charge construction of 18% and 5% proposed by the Centre.
“We are for rate rationalisation. The rate impact of the same is on the revenues of the state are of great concern. Since the Central Govt has carried out these deliberations and developed proposals outside the GST consultation forum, we are not in the knowledge of the full proposals including measures to protect State revenues, if any. We are looking forward to understand and discuss,” he stated.
While the Centre, he stated, had varied different income sources, i. e. Direct taxes, customs, dividends of monopoly PSUs, dividends from RBI, and so forth, the States have very restricted sources.
“GST is the biggest source for the states. So, any major shock in GST will fundamentally affect the fiscal health of the states. So, we would like the rate rationalisation carried out along with protections for state revenues,” he added.
Mr. Gowda added that his authorities had raised the consequential influence of GST on State’s funds earlier than the Finance Commission, but didn’t get a lot pleasure out of the response, which principally saved separate the GST and different monetary points.
“In my view, though, this is a structural issue. The GST, by moving from origin to destination principle, has fundamentally affected and altered long term revenue and fiscal trajectory of some states. Hence, it is a fiscal issue. Now, if the Finance Commission refuses to recognise this, then states like Karnataka and few others will get the wrong end of both worlds. GST council will only discuss GsT issues and will consider fiscal issues as extraneous and outside the mandate of the Council and hence not really to be debated in the Council. And, FC will refuse to discuss the fiscal impact of GST in state finances,” he stated.
“With no redressal mechanism in the federal structure. I sincerely hope, for the sake of our federal unity, that these issues will be understood and adequately addressed. I hope these issues will not be brushed aside. Such a move will only harm the federal spirit,” he added.
A gathering of the GoM on charge rationalisation will be addressed by Union Finance Minister Nirmala Sitharaman on Wednesday (August 20, 2025).
