The revenue income of the state will be affected and will atke years to stabilize: File photoKerala finance minister Thomas Isaac's claim that the goods and services tax (GST) will bring more tax revenue to the state has been debunked by the Kerala public expenditure committee.
This has been revealed in the first report of the committee headed by renowned economist Pinaki Chakraborthy.
The committee, set up by the present government, says that GST has not augured well for the state.
The government is facing a revenue loss because most of the products that used to generate tax revenue for the state has seen a reduction in the levy.
Report findings
• The center and the state equally share the GST revenue. Because of this there will be considerable drop in the revenue earned by the state.
• Earlier, the average levy was 14.5% on most products. After the GST was implemented, the tax on most revenue-earning products like cement, paints etc. went up to 28%, giving the false impression that revenue income will go up.
But, in reality, the state will be getting only 50% of this levy, which is 14%. So, in effect, the state will see a drop of .5% in its income on most of these products.
• Products like hair oil, tooth paste, ice-cream and similar day-to-day products had a tax of 14.5% tax. Now, with the GST on these products is fixed at 18%, the state will be fetching only 9%.
• Since the service tax has gone up, this may result in better revenue generation. But GST has complicated systems like input credit and different slabs, it is difficult to ascertain the immediate benefits in the short term.
What Issac says
Since Kerala is a consumer state, the rise in tax revenue will go up to 20%.
Once the tax revenue picks up, within four years there will be solutions to Kerala's financial problems.
Kerala will be getting the tax levied on products that are coming to its shores from other states.
However, there are troubles because of the hasty implementation of GST.
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