EXCLUSIVE: SC ruling on GST Council a big boost for federalism, says KN Balagopal, Kerala’s finance minister

Talking exclusively to BT, Balagopal said that under GST states had to suffer revenue loss, which now can be corrected.

KN Balagopal, Kerala’s finance minister 

The Supreme Court (SC) today came out with landmark judgment that a recommendation of the GST Council isn’t binding on Centre and States and holds persuasive values.  This judgment elicited a raft of responses from policymakers, economists and experts.  Commenting on the judgment, Finance Minister of Kerala, KN Balagopal, in an exclusive conversation with Business Today, said, “My initial understanding about the judgment is that it is a positive development. And we have to read the full text later which is not out as of now. Actually, the GST from inception has been against the interest of federalism. And this judgment has upheld the freedom of states in taxation.”  

“This will be a big boost for cooperative federalism. And that is what I feel from the first reading of the verdict that the Supreme Court has given today,” Balagopal said. 

Balagopal further said, “Now from June 30, the GST compensation system will be finished. So, if it is not extended, Kerala will lose around 10,000 crores per year because the new regime came and it was not functioning properly. It is not only about Kerala, many states are demanding for extension of the compensation.” 

He pointed out that the freedom of the state to assess financial viability and the powers of taxation was stopped unilaterally by the application of GST. 

“If a state wanted to tax something more and if you wanted to tax as a special case or give some reduction, we did not have any power to do that and that is why I say this judgment could be helpful for cooperative federalism,” Kerala’s FM added. 

According to Balagopal, because of GST, Kerala and many states actually lost a lot of revenue compared to pre-GST time. “The revenue rate was around 16 per cent and the annual growth was 14 per cent per year. Now, on both these aspects, there is a sharp dip,” he pointed out. 

https://www.businesstoday.in/latest/economy/story/exclusive-sc-ruling-on-gst-council-a-big-boost-for-federalism-says-kn-balagopal-keralas-finance-minister-334306-2022-05-19