Kerala Finance Minister K. N. Balagopal has raised serious concerns over the impact of the proposed GST reforms on state finances, warning that the changes could push Kerala into a severe fiscal crisis unless protective measures are introduced.
According to Balagopal, the state is staring at a direct annual revenue loss of around ₹2,500 crore from sectors like automobiles, cement, electronics, and insurance. Factoring in the Centre’s share, the combined hit could cross ₹5,000 crore. Overall, Kerala estimates a much larger shortfall between ₹8,000 and ₹10,000 crore each year due to the broader tax restructuring.
The minister warned that this loss could destabilise the state’s budget, as nearly 95% of Kerala’s revenue is already committed to salaries, pensions, and vital welfare schemes. Key sectors such as healthcare, education, housing under the LIFE Mission, and agricultural procurement may face serious strain if GST receipts fall sharply.
Balagopal stressed that the Centre must step in with a renewed compensation mechanism. The five-year protection provided during GST’s rollout has ended, leaving states with limited revenue options. He argued that unlike the Centre, which enjoys access to cesses and direct taxes, states depend heavily on indirect taxes to sustain public services.
He also flagged the risk of companies exploiting tax cuts for profit. Despite a reduction in GST on cement, for instance, prices have reportedly gone up by ₹30–₹35 per bag. To prevent such profiteering, Kerala’s GST and Consumer Affairs departments will closely monitor industry behaviour to ensure that the benefits actually reach the people.
Another major concern is the steep hike in GST on lotteries from 28% to 40%. Balagopal warned that this decision could jeopardise the livelihood of nearly two lakh people in Kerala who depend on the sector. He demanded that states be allowed to retain control over lottery taxation, given its local economic importance.
At the 56th GST Council meeting held on September 3–4, Kerala pushed for revenue safeguards and even proposed revising the Centre–State sharing formula to 60:40 in favour of states. It also opposed the lottery tax hike and taxation of imported luxury goods. However, Balagopal lamented that these concerns were not given serious consideration, forcing Kerala to formally register its protest.
While supporting the principle of GST rationalisation, Kerala insists that the reforms should not come at the cost of state finances or public welfare. Balagopal has made it clear that without renewed compensation, fairer revenue sharing, and consumer safeguards, Kerala could be forced into a financial crisis that threatens its welfare-driven development model.
