Kerala Proposes 60% State Share in GST, Seeks Fairer Distribution

In a significant move, Kerala Finance Minister K N Balagopal has advocated for a revision in the central-state tax sharing ratio under the Goods and Services Tax (GST) framework. During the GST Council meeting in New Delhi, he proposed that states should receive a larger share of the GST revenue, suggesting a shift from the current 50:50 ratio to a 40:60 distribution in favor of the states. This statement was released by his office following the council meeting.

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The minister highlighted a key decision made during the meeting that could prove to be highly advantageous for Kerala. The resolution pertains to the Integrated Goods and Services Tax (IGST), specifically addressing the filing requirements for e-commerce operators. Under the new directive, GSTR-8 returns filed by e-commerce platforms will now include details about the destination state of the tax along with the tax amount. This adjustment is expected to significantly benefit Kerala by ensuring that the state receives its rightful share of tax revenue from sales conducted through major e-commerce platforms like Amazon and Flipkart.

Previously, ambiguity in specifying the consumer's state in these returns had led to Kerala missing out on its share of IGST collected from consumers within the state. The recent decision by the GST Council aims to rectify this issue, following Kerala's presentation of facts and findings from various studies that highlighted this discrepancy.

Furthermore, during the council meeting, discussions were held regarding the declining share of IGST revenue received by states. The union government acknowledged a similar downtrend in central revenue from IGST. It was agreed upon to investigate whether these reductions were due to lapses within the IGST system itself. A re-examination involving state GST officials is scheduled within 10 days to identify and address any systemic issues, with an aim to safeguard revenue streams.

Looking ahead, continuous monitoring of all matters related to GST will proceed after the presentation of the union budget. The next GST Council meeting is anticipated to take place in August or September, as stated by Balagopal. This ongoing dialogue and series of adjustments underscore a collective effort to refine and enhance India's GST framework for equitable revenue distribution among central and state governments.