Lok Sabha Question No. 216 (STARRED), answered on 2025-12-15
Subject: Revenue Loss to States due to GST Rationalisation
Ministry: FINANCE
Asked by: Shri S Venkatesan, Shri V K Sreekandan

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA STARRED QUESTION NO. *216

TO BE ANSWERED ON MONDAY, DECEMBER 15, 2025/AGRAHAYANA 24, 1947 (SAKA)

## REVENUE LOSSES TO STATES DUE TO GST RATIONALISATION

*216. SHRI V K SREEKANDAN:

SHRI S VENKATESAN:

Will the Minister of Finance be pleased to state:

- (a) whether it is a fact that Goods and Services Tax Council is likely to constitute a new Group of Ministers to address the issues of initial revenue losses incurred by the States due to the rate rationalization under the GST reforms, if so, the details thereof; (b) whether it is a fact that the State of Kerala has expressed concerns about severe revenue losses due to the rate rationalization implemented in September 2025, if so, the details thereof; (c) whether it is a fact that Kerala could face an annual revenue loss of Rs.8,000 -10,000 crore due to the GST reforms; (d) whether it is a fact that as per the Government's estimate the gross revenue loss is likely to be Rs.93,000 crore, which will be partially compensated by additional revenue of Rs.45,000
- crore due to shift in goods from 28 percent slab to 40 percent; and (e) if so, the details thereof?

## ANSWER

THE MINISTER OF FINANCE (SMT. NIRMALA SITHARAMAN)

(a) to (e): A statement is placed on the Table of the House.

****

## Statement referred to in reply to the LOK SABHA Starred Question No. 216 raised by Shri V K Sreekandan & Shri S Venkatesan for 15th December, 2025 on 'Revenue losses to States due to GST Rationalization'

(a)   At present no such proposal is under consideration

(b&c)  During  the  56 th meeting  of  GST  Council,  the  Hon'ble  Finance  Minister  of  Kerala observed that the consumption pattern in Kerala is such that majority of the items consumed attract  a  higher  rate  of  tax.  Therefore,  the  revenue  loss  to  the  state  on  account  of  the  rate rationalization is likely to be relatively higher.

It was further stated that the State of Kerala had undertaken its own estimates of the potential revenue  loss  arising  on  account  of  GST  rate  rationalisation  by  focusing  on  four  sectors  automobiles, insurance, cement and electronics. As per their estimates, from these sectors, the State expected to lose around Rs. 2,500 Crore annually and the total annual revenue loss is likely to be more than Rs. 8,000 Crores for Kerala.

(d & e) Based on the data of consumption patterns and entire value chain for the period 202324, the items that moved from the 28% to the 40% tax bracket are projected to account for additional  revenue  of  approximately  Rs.  45,570  Crore.   The  broader  rate  rationalization initiative  is  expected  to  lead  to  a  revenue  implication  of  around  Rs.  93,300  Crore  of  net negative.

Taken together, these two figures are likely to result in about Rs. 47,700 Crore of net negative. However these figures should not be viewed as definitive since tax collection is not static and there is buoyancy. Moreover, lower rates are likely to lead to improved compliance and fewer disputes.

*****