Overhaul of GST System to Impact States Financially
The Indian Finance Minister, Nirmala Sitharaman, has announced plans for next-generation GST reforms, aiming to bring relief to the common man and MSMEs. The proposed reform could equate to over 0.4% of India's GDP, but it also comes with a significant cost for the Indian exchequer.
The Indian government is expected to face an annual cost burden of more than Rs 1.2 lakh crore due to the upcoming GST reforms. This is because the reforms aim to reduce tax rates on daily-use and mass-market goods by rationalizing slabs mostly to 5% and 18%, and by eliminating certain slabs like the 12% rate. This will result in significant revenue loss for both the Union and the states.
To address this, states are likely to demand revenue safeguards since the reforms could lower their GST income, impacting state finances particularly through the phasing out of compensation cess and reduced rates on many goods. The GST reform is expected to result in states bearing a disproportionate financial impact.
Meanwhile, in Maharashtra, the state has been hit hard by heavy rains. Over 5.4 lakh hectares of crops have been damaged, resulting in eight reported deaths. The states' effective losses due to GST changes are estimated to be 0.3% of India's GDP.
In a separate development, Rohit Pawar has alleged a Maharashtra minister's involvement in a Rs 5,000 crore land scam.
On a positive note, the Union Cabinet has approved an Online Gaming Bill, which could potentially regulate and legalise the online gaming industry in India.
These developments highlight the challenges and opportunities that India faces in the coming months, as the nation navigates through economic reforms and natural calamities.
