Opposition states back GST rate cuts, urge genuine cooperative federalism

Eight opposition-ruled States support GST rate slab reduction, consumer benefits, and compensation for revenue losses. Congress stresses the council meeting should advance cooperative federalism and fully transfer levies on sin and luxury goods to State

New Delhi: Opposition-ruled states have extended their support for reducing the number of GST rate slabs and lowering the rates for mass consumption items, while demanding a mechanism to ensure the benefits are passed on to consumers, Congress leader Jairam Ramesh said on Saturday.

He also said the Congress hopes that next week’s GST Council meeting would not be just a “headline-grabbing exercise so typical of the (Narendra) Modi government”. According to Ramesh, the eight opposition-ruled states have also demanded compensation for all states for a period of five years, with 2024-25 as the base year, as their revenues are expected to be adversely impacted by the rate cuts.

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They have demanded additional levies on ‘sin’ and luxury goods over and above the proposed 40 per cent be fully transferred to states, he said. “Eight Opposition-ruled states — Karnataka, Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal — have extended their support to the reduction in the number of GST rate slabs and a reduction in the rates themselves for items of mass consumption,” the Congress leader said on X.

He said these states have also called for a mechanism that ensures that the benefits of the rate cuts get passed on to consumers. They have also demanded compensation to all states for a period of five years with 2024-25 as the base year, since their revenues are bound to be adversely impacted by the rate cuts, Ramesh said.

The eight opposition-ruled states have also called for additional levies on ‘sin’ and luxury goods over and above the proposed 40 per cent be fully transferred to states, he said, adding the Centre gets close to 17-18 per cent of its revenue from various cesses that are not shared with the states.

The Congress leader stressed that these demands are perfectly legitimate and are bolstered by recent papers published by the Union Finance Ministry’s own National Institute of Public Finance & Policy (NIPFP).

According to him, the Congress has long been demanding a GST 2.0 that not only reduces rate slabs and cuts rates but also brings about drastic simplification of procedures and compliance requirements, especially for MSMEs. Ramesh further said the Congress has also been stressing the essentiality of ensuring that the interests of all states are fully protected.

“It hopes that the GST Council meeting scheduled for next week will not be merely a headline-grabbing exercise so typical of the (Narendra) Modi government, but will also advance the cause of genuine cooperative federalism in letter and spirit,” he added.

The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation. The two-day meeting will be held in New Delhi.

The council, comprising finance ministers of all states and Union Territories, besides that of the Centre, will deliberate on the recommendations made by the three GoMs on rate rationalisation, compensation cess, and health and life insurance.