New GST Regime May Cost Kerala Up to Rs 2 Lakh Crore, Says Finance Minister

Kerala’s Finance Minister, K. N. Balagopal, has warned that the state’s revenue could drop sharply following the new GST changes that took effect on Monday.

The GST Council, which includes Kerala and other states, decided to simplify the tax structure into just two slabs: 5% and 18%. According to the central government, about 99% of goods will now fall under the 5% category, which should make prices lower for consumers.

Dairy products have been fully exempted from GST, allowing Milma to cut prices on milk, ghee, butter, paneer, and ice cream.

However, Finance Minister Balagopal cautioned that while states supported the reform, businesses might not always pass on these tax benefits to customers. He said even Union ministers admitted this issue, warning that prices could go back up in a few months.

He also said Kerala could lose between Rs. 50,000 crore and Rs. 2 lakh crore due to the new system. This loss could seriously affect the state’s ability to pay salaries, social security pensions, and fund development projects, since 41% of Kerala’s total income comes from GST.

Balagopal also criticized the center for not doing enough research before making these changes.

Meanwhile, the state finance department clarified that although GST on lottery tickets has increased from 28% to 40%, the ticket prices will not change. Instead, the increase will be covered by reducing agents’ commissions and prize payouts.

In many areas, supermarkets and larger stores have already started selling goods at lower prices under the new GST rates. But small shops said they need a week or two to adjust, as they still have old stock purchased at the previous tax rate.

A shopkeeper named Santhosh in Kozhikode said he couldn’t cut prices immediately because his current inventory was bought at higher rates. Representatives from Vyapari Vyavasayi Ekopana Samithi (the traders’ organization) said smaller retailers will take some time to update their pricing and billing systems.