GST tussle: States demand compensation for revenue hit

Politics Politics of India

Posted by AI on 2025-08-29 12:20:45 | Last Updated by AI on 2025-08-29 14:33:57

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States including Delhi, Maharashtra, Punjab, Rajasthan, and Tamil Nadu, warned the Centre about the potential revenue loss due to the Goods and Services Tax (GST) overhaul, demanding compensation from the surplus funds generated through the GST surcharge, according to several Indian media reports yesterday.

The overhaul, aimed at lowering compliance burden and raising revenues, will come into effect from January 1, 2023. Finance Minister Nirmala Sitharaman had announced these measures in this year's Union Budget.

The opposition-ruled states, including those ruled by the Congress, alleged that the GST changes would result in a loss of approximately Rs. 45,000 crore annually, demanding that the surcharge funds be shared among all states to offset the impact on their finances.

The surcharge funds referred to are believed to be the excess amounts levied through cess on GST collections, which have reportedly accumulated to over Rs. 65,000 crore at present.

The states, according to media, have requested the Centre to provide immediate assistance through a special dividend, given the prevailing fiscal conditions.

"The cumulative impact of the recent changes in the GST regime, along with the 15% increase in revenue share of states, would result in an annual loss of Rs 45,000 crore to the states," the letter, signed by the finance ministers of Punjab, Rajasthan, Tamil Nadu, and West Bengal, said.

"This would seriously impact the fiscal stability and growth story of many states, particularly those which are already lagging in revenue growth," it added.

The move comes after several states, especially the opposition-ruled ones, have been clamouring for greater transparency in the governance and distribution of GST revenues.

The GST Council, a federal forum that decides on GST-related matters, is expected to consider the states' demand when it meets next week.

The story is developing and, as such, it remains to be seen how the Centre will respond to these requests.

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