Telangana has voiced strong support for the proposed Goods and Services Tax (GST) rate rationalization but insists on a robust compensation mechanism to safeguard state revenues, Deputy Chief Minister Mallu Bhatti Vikramarka announced on Thursday. Speaking after attending a Group of Ministers (GoM) meeting on GST rate rationalization in New Delhi, Vikramarka emphasized that while reducing tax burdens is welcome, it must not jeopardize state finances critical for welfare schemes and infrastructure projects.

Vikramarka proposed two solutions to balance tax relief with revenue protection. First, he suggested continuing the existing GST compensation cess, ensuring that all collected funds are fully allocated to the respective states. Alternatively, he proposed eliminating the cess but increasing GST rates on luxury and sin goods to current levels, with the additional revenue distributed directly to states. “This approach will ease the tax burden on ordinary citizens while enabling Telangana to sustain welfare programs for the poor and middle class, as well as development projects,” a state government release stated.

The Deputy CM highlighted the disparity in state revenue growth, noting that when GST was introduced, states were promised a 14% annual growth rate, supported by a five-year compensation mechanism to stabilize finances. However, Telangana and other states are currently experiencing only 8-9% growth, falling short of expectations. Vikramarka also pointed out that southern states like Telangana, Karnataka, and Tamil Nadu receive a disproportionately low share of central devolution compared to their significant contributions to national revenues.

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The GoM, constituted by the GST Council, is tasked with recommending changes to GST tax slabs and rates. Telangana’s stance underscores the need for equitable fiscal policies to support state-led initiatives while advancing national tax reforms. As discussions continue, the state’s call for a fair compensation framework has sparked a broader debate on balancing tax relief with financial stability for India’s states.

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