Ahead of the key GST Council meeting scheduled for September 3 and 4 for the rationalisation of GST rates, Karnataka’s revenue minister and representative in the council, Krishna Byre Gowda, said on Tuesday that the Centre should ensure the losses suffered by the states due to the move are compensated.
Addressing a news conference, Gowda said the rationalisation measure with two GST slabs—of 5 per cent and 18 per cent—would result in annual losses to the tune of Rs 15,000 crore for the state exchequer.
“We are not opposed to rationalisation. But the states should be compensated (for the shortfall in revenue),” he said, suggesting that the Centre compensate the states using the cess it collects.
Responding to queries, he said that some states had sought compensation of 14 per cent of their annual revenue to offset the shortfall caused due to the rationalisation measure. The Centre, he said, has enough sources to mobilise funds, whereas the revenue generation options for states were limited.
According to the minister, 70 per cent of the revenue loss due to the measure will be borne by the states. “The Centre is not telling us the extent of loss,” he said, adding that the move would have a long-term impact on the finances of the state governments and “will be a blow for the autonomy of states”.
“How can any state government govern with autonomy? It will be a state government existing only in name and will be more of a glorified municipality,” he added.
Gowda further said the decision to reduce the number of GST slabs was made unilaterally, without consulting the states. Not providing compensation to states would prove to be a fatal blow to the Union and the GST system itself, the minister added.