The countries concerned regarding possible revenue losses from rationalizing the rate of commodity and services tax

Although the countries have shown support for the center’s proposal to rationalize commodity and services tax rates (GST), concerns about revenue losses have become clear to many of them. The meeting of the Commodity and Services Tax Council is likely to witness new calls for compensation to help countries lose possible losses in revenue.

One of the options on the council is an additional duty on a 40 % average of sin and luxury materials. This will not only maintain a tax on these elements at the current level, but will also lead to some additional revenues.

The center’s proposal to obtain two main rates of commodity and services tax by 5 % and 18 %, along with a rate of 40 %, while a rate of 12 % and 28 % is seen on revenues of about 50,000 rupees in this fiscal year and analysts say it can lead to losses slightly more than rupees in the full fiscal year. Exempting life and health insurance policies for individuals is seen by losing revenues of 9,700 rupees.

Expecting that some of this will be met by high sales that will lead to more revenue groups, but many countries are concerned about the short -term impact of this step, especially at a time when they also await the report of the Sixteenth Finance Committee on the participation of tax revenues between the center from April 1, 2026 to March 31, 2031.

In recent days, states, including the state of Karnataka, Kerala, Tamil Nadu, Bengal and Punjab, indicated the effects of revenue on rationalizing the rate of commodity and services tax, although it has largely supported this step that will benefit from ordinary people.

The Minister of Revenue in the state of Karnataka Krishna Bear Goda stated that the states have expressed their concerns about the meeting of the group of ministers of commodity and services tax on rationalizing prices, which appreciates cumulative losses anywhere between 85,000 rupees to rupees 2 Kah. KN Balagipal State Secretary of Finance estimated that state revenues could face a decrease of 8000 rupees to 9000 rupees annually.

After the GOM meeting, Punjab and Western Bengal expressed their concerns about the losses on revenue from rationalizing the commodity and services tax rate.

A report issued by Ambit Capital indicated that the annual revenue loss may range from about 70,000 rupees to 1.8 rupees. However, the impact of revenue on countries will be much higher than the center, noting that countries will eventually carry two thirds of the revenue losses due to low rates.

The estimated revenue loss will be a common burden. “While countries will directly lose part of their GST revenues, they will lose indirectly. Because the total decrease in commodity and services tax revenue will reduce the total tax revenue in the center, including about 33 % of the budget to be transferred to the states.”