Hyderabad: State Deputy Chief Minister Bhatti Vikramarka supports GST rate adjustments but insists on a strong system to protect state revenues. He suggests states should receive full compensation for any revenue losses, similar to the GST Compensation Cess. Bhatti proposes an extra tax on luxury and sin goods to maintain current tax levels, with all funds going to the states. He notes states are facing financial pressure and losing fiscal independence.
Bhatti participated in a discussion on the final report of a ministerial group about compensation cess, insurance, and GST rate adjustments during the GST Council meeting. He shared concerns about how these changes affect states, emphasizing that reduced state revenues would negatively impact essential services like health and education, as well as welfare programs. Lack of funds could also stall infrastructure development.
Before GST, states had the flexibility to plan and generate their own revenue. Now, they lack this financial freedom while still being responsible for expenses. Bhatti argues the central government should borrow funds to cover states’ revenue shortfalls and repay these loans by extending the compensation cess beyond five years.
He suggests using FY 2024–25 as the base year for compensation calculations. State revenue should include GST and compensation cess based on supply location. States should receive protection with a 14% annual growth rate, mirroring the average of the past three years’ growth. Compensation should last for at least five years and then be re-evaluated based on GST performance.
