States Advocate for Revenue-Linked GST Rate Reductions
Eight states are preparing to propose several suggestions at the upcoming GST Council meeting scheduled for September 3 and 4. These states emphasize the need for GST rate rationalization to be underpinned by a strong framework for revenue protection. They argue that any revenue loss experienced by states should be fully compensated through a mechanism similar to the GST compensation cess. Furthermore, it has been suggested that the central government should ensure a 14% annual revenue growth for states, with guaranteed compensation for any revenue shortfall for at least five years. After this period, the compensation scheme may be reassessed based on the GST's performance and buoyancy.
The eight states are expected to place half a dozen suggestions before the GST Council when it meets in the capital on 3 and 4 September, said a second person, who is also privy to the developments.
The states believe that GST rate rationalisation should be supported by a robust revenue protection framework. “States’ revenue loss must be fully compensated through a scheme similar to the GST compensation cess,” said the person, who spoke on the condition of anonymity.
The Centre should guarantee 14% annual revenue growth for states, the person said, adding that compensation for any revenue loss should be assured for a minimum of five years, beyond which it may be reviewed based on GST buoyancy.
