GST needs structural changes: Kerala FM

Central Board of Indirect Taxes

NEW DELHI: Kerala’s finance minister KN Balagopal has a tough task at hand, salvaging the state’s economy ravaged by successive natural calamities and coronavirus pandemic. Balagopal, a post graduate in commerce and law, presented the full FY22 state budget in June after the Left Democratic Front returned to power in assembly polls earlier this year. In an interview, the 57-year old minister speaks about the need for a GST redesign and the development challenges before the state.

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What should be the future direction of GST?

We have expressed our view to the GST Council that compensation period should be extended by another five years. Our GST compensation dues of over Rs4,000 crore should be paid. Also, GST needs some structural changes. We have sought a comprehensive discussion on this. The next meeting of the GST Council is expected to be in August. Successive GST rate cuts have affected state revenues. There should be a serious discussion on this.

The Reserve Bank of India said in 2019 that after multiple tax rate adjustments, the effective weighted average GST rate declined from 14.4% at the time of GST inception to 11.6%. The Fifteenth Finance Commission had pointed out in its final report that the rate neutrality of GST, which was compromised in multiple tax rate cuts, needs to be restored.

During the covid period, we cannot raise taxes and put burden on people but if fair share of revenue does not come, states will weaken. That is, administration, law and order, public services, amenities at school and hospitals and other public services will suffer. Governments need funds for governance.

Kerala’s economy contracted 3.82% in FY21. How do you propose to turnaround the state economy?

The pandemic hit states across India as well as rest of the world in a big way. Prior to covid, Kerala had to face two floods and an outbreak of Nipah virus disease. Covid came at time the state was coming out these natural disasters. Naturally, growth suffered. Healthcare is a key part of our recovery strategy. Vaccinating every citizen and preparing for a possible third wave of the pandemic with adequate healthcare facilities are the key elements of it. In the FY22 full budget we presented–on 4 June–after returning to office,

we are spending about Rs2,800 crore towards facing health emergencies. We are providing free covid treatment and patients are given all amenities including food free of cost. We are also providing food grains and grocery kits to people. To revive the economy, we are spending on health care and are making sure that people have funds to make purchases. In this year’s budget, we have introduced several schemes with an outlay of Rs8,900 crore which includes timely payments for contractors and financial support for those not getting any other welfare benefits. (This is part of a ₹20,000 crore package announced in the FY22 state budget.)

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