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**Summary:**
Kerala Finance Minister K.N. Balagopal has expressed concerns about the impact of the recent GST rate rationalization on state revenues. While welcoming the reduced rates for consumers, he emphasized that the lack of a compensation mechanism for the expected annual revenue loss (estimated at ₹8,000-₹10,000 crore for Kerala) will hinder the state’s ability to meet its social responsibilities, such as health, education, and public distribution. He argued that the benefits of economic growth should be shared equitably across the country and that progressive taxation should focus on high-income earners and luxury goods. He also urged that the tax breaks provided by the GST rationalization should be passed on to consumers.
**News Article:**
**Kerala Minister Warns GST Rate Cuts Could Harm State Finances Without Compensation**
**New Delhi, September 15, 2025:** Kerala Finance Minister K.N. Balagopal has raised concerns about the potential impact of the Goods and Services Tax (GST) rate rationalization on state finances, arguing that without a compensation mechanism, states will struggle to maintain crucial social welfare programs.
In an interview, Minister Balagopal acknowledged the benefits of the rate cuts for consumers, stressing that businesses must pass the tax savings to consumers. However, he warned that Kerala alone faces an annual revenue loss of ₹8,000-₹10,000 crore due to the changes, jeopardizing its ability to fund essential services like healthcare, education, and the public distribution system.
“GST rationalisation will result in huge discounts in taxes, and the prices should come down in the coming days. It should be passed on to the common consumers,” said Balagopal.
The GST Council approved a revised two-rate structure (5% and 18%) earlier this month, effective September 22. While intended to benefit consumers by lowering prices, the move raises questions about the long-term financial health of states reliant on GST revenue. Balagopal emphasized the need for equitable economic growth, asserting that benefits should reach all parts of society.
“The Indian economy is growing like anything. We are all happy about that… the growth should be beneficial for the entire country… those who are deserving should get it,” he said.
Balagopal also advocated for progressive taxation, suggesting higher taxes on high-income earners and luxury goods to ensure a fair distribution of wealth. He argued that weakening states through uncompensated revenue losses undermines the very development the nation is boasting about.
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