Dharmani warns of Rs 1,000 crore annual loss to state after GST rationalisation

The state of Himachal Pradesh will suffer revenue loss of over Rs 1000 crore annually following the Goods and Service Tax rate rationalisation, state Finance Minister Rajesh Dharmani stated on Saturday.

The statement came in the backdrop of upcoming GST Council meeting scheduled on September 3-4 to deliberate on rate rationalisation.

The Centre's proposal, submitted to the Group of Ministers on rate rationalisation, includes reducing the current four GST slabs (5 per cent, 12 per cent, 18 per cent, and 28 per cent) to two (5 per cent and 18 per cent), with a special 40 per cent rate for sin and luxury goods.

Dharmani, while supporting two-slab structure with a special 40 per cent rate for sin and luxury goods, advocated for a mechanism to ensure that the benefits of the reforms transferred to consumers only and the companies should not be benefitted from this.

He also advocated compensation for revenue losses due to GST rate rationalisation for the first five years or until revenue stabilises.

“The Centre has not shared any mechanism so far for the transfer of GST rationalisation benefit to the common man. How they will ensure that the reduction of prices post rate rationalisation will benefit the consumers only? The Central government should make a framework for that. Rationalisation should not result in profiteering of companies,” he said.

Emphasizing environmental concerns, Dharmani urged for mechanism to compensate eco-friendly states like Himachal Pradesh, which maintain green cover. He highlighted the state's challenges, noting 26 cloudburst incidents, resulting in approximately 350 deaths, with Mandi, Chamba, and Lahaul-Spiti severely affected.

The state finance minister also suggested that there should one more slab in the new structure for red category industries which are severely polluting the environment.

On Friday, the finance ministers and representatives of eight opposition-ruled stated held a meeting in Delhi and finalised a proposal for the GST council, demanding compensation for the revenue losses of the state governments following GST rate rationalisation.