Opposition-ruled states have raised alarms over the Centre’s proposed GST rate overhaul, estimating a staggering revenue shortfall of Rs 1.5 lakh crore to Rs 2 lakh crore. Finance ministers from Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal convened to strategize ahead of the GST Council meeting scheduled for September 3-4, 2025.

The states propose an additional duty on sin and luxury goods alongside the suggested 40% GST slab to offset losses and maintain revenue neutrality. Karnataka’s Finance Minister Krishna Byre Gowda, speaking to reporters, warned that states could lose 15-20% of their current GST revenue, threatening fiscal stability. “This level of revenue loss could destabilize state governments’ finances,” Gowda stated, urging a five-year compensation period to stabilize state revenues.

When GST was introduced, the revenue-neutral rate stood at 14.4%. Post-rationalization, it dropped to 11%, and the Centre’s latest proposal to streamline GST into a two-tier structure of 5% and 18%—down from the current 5%, 12%, 18%, and 28% slabs, plus a cess—could further reduce it to 10%. The Centre also proposed a 40% slab for sin and luxury goods.

Also Read: Ukraine Will Not Cede Territory, Says Envoy in India

“Rate rationalization is acceptable, but states must be compensated,” said Himachal Pradesh’s Technical Education Minister Rajesh Dharmani. Punjab’s Finance Minister Harpal Singh Cheema emphasized the need for a profiteering detection mechanism to ensure rate cuts benefit consumers.

The states’ joint proposal insists on setting 2024-25 as the base year for revenue protection calculations. They also suggested that if the additional levy fails to cover deficits, the Centre should secure loans against future levy receipts to bridge the gap.

Also Read: E-rickshaw Crash Claims Life of 8-Year-Old in Delhi