State Deputy Chief Minister Mallu Bhatti Vikramarka has said that Telangana could lose Rs 7,000 crore revenue annually following the proposed GST rate rationalization.

Addressing the media in the national capital on Friday, following a meeting of Finance Ministers from eight opposition-ruled states, he requested the Union government to properly compensate the states for the losses expected from the new tax measure. The Finance Ministers from eight states -- Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal -- decided to present their proposal to the GST Council at the next meeting on September 3 and 4.

Vikramarka said that when the GST was introduced, the Central government had "assured" a 14 per cent growth in states' tax revenues, and if not achieved, the shortfall would be compensated until the system stabilised. But unfortunately, the anticipated stability has not taken place as growth in states’ tax revenues is still hovering between 7 per cent and 8 per cent. The Telangana Deputy CM commented that, although some states cannot publicly express the pain, they are suffering due to losses from GST, it remains a pertinent issue.

In the context, the Deputy CM said, Telangana's accumulated losses since the introduction of GST are estimated to be nearly Rs 80,000 crore. "Estimates are saying that Telangana alone may lose Rs 7,000 crore annually (after the GST rate rationalisation). So, when a state is estimated to lose Rs 7,000 to Rs 10,000 crore, it would impact welfare and developmental programmes of the respective states”, he said, while clarifying that his government welcomes the rate rationalization. In order to compensate states for the losses due to rate rationalisation, the Centre should channel the revenue collected from taxes or cess on sin and luxury products to the states, he opined.

Currently, GST revenues flow to states through two channels--State GST (SGST) and Integrated GST (IGST). In cases of intra-state trade, the tax collected is divided equally between the Centre and the state. For inter-state transactions, IGST is levied and initially collected by the Centre, which then transfers a share to the state where the goods or services are consumed. According to the Union Budget for 2024–25, states earn approximately Rs 12–13 lakh crore annually through GST collections, which remain a vital source of income for meeting budgetary requirements.

Bhatti reasoned that had GST not been there, Telangana would have got tax revenue of Rs 69,373 crore during 2024-25. However, the state earned Rs 42,443 crore only through GST. "Because of the GST, in only 2024-25, we have lost Rs 27,000 crore (tax revenue). Cumulatively the state has lost Rs 80,000 crore," he said, adding that the state government would request the Centre to consider compensating the losses.

The deputy CM said that when the states lack freedom to levy taxes, and no mechanisms are introduced to generate additional revenues, the fiscal burden becomes extremely heavy.