Telangana to lose 7,000 Cr if Centre goes ahead with GST rate rationalization: Dy CM Bhatti

New Delhi: Telangana Deputy Chief Minister Mallu Bhatti Vikramarka has warned that the state could lose nearly Rs 7,000 crore annually if the Centre proceeds with its proposed Goods and Services Tax (GST) rate rationalisation.

Speaking at a consultative meeting of States on GST at Karnataka Bhavan here on Friday, he called for urgent measures to safeguard States’ revenues.

Heavy financial impact on Telangana

Highlighting the implications of the proposed move, Vikramarka said Telangana alone stands to lose at least Rs 5,100 crore from rate rationalisation, and nearly Rs 7,000 crore when other revenue impacts are factored in.

“This accounts for about 15% of the State’s GST revenues. With over 80% of our revenues tied to welfare spending, such a setback will severely affect social and development programmes,” he said.

Slower growth under GST

The Deputy CM pointed out that Telangana’s GST collections have grown at only 10% CAGR up to 2024-25, compared to 18% CAGR under VAT earlier. “If we had continued with VAT and fiscal freedom, our revenues in 2024-25 would have been Rs 69,373 crore. Under GST, we managed only Rs 42,443 crore,” he noted.

He further stated that GST contributes just 39% of Telangana’s own tax revenues, making the State disproportionately vulnerable compared to the Centre. The GST-to-GSDP ratio has also dropped from 3.07% in 2022-23 to 2.58% in 2024-25.

Demand for compensation

While reiterating Telangana’s support for rationalisation in principle, Bhatti Vikramarka stressed the need for a robust compensation framework. “States have lost fiscal autonomy. If the Centre reduces rates without providing an alternate revenue mechanism, the fiscal burden becomes unbearable. A proper compensation mechanism is essential to ensure States can continue welfare and infrastructure programmes,” he said.

He also urged that any tax cuts or exemptions should directly benefit the poor and middle class, rather than the luxury segments.

Criticism of Centre’s approach

Bhatti Vikramarka criticised the Centre for what he called a unilateral announcement of rate rationalisation. “In a multi-party parliamentary democracy, cooperative federalism is key. The Centre should have consulted States before making such a decision,” he remarked.

States to meet again on September 3

The meeting saw participation from ministers representing Karnataka, Punjab, Kerala, Jharkhand, Tamil Nadu, Himachal Pradesh, and officials from West Bengal. The leaders decided to hold another round of discussions at Tamil Nadu Bhavan on September 3 before placing their collective views before the GST Council.

Appeal for flood assistance

On the sidelines, Bhatti Vikramarka also spoke about the recent floods in Telangana. He said Chief Minister A. Revanth Reddy had conducted an aerial survey of affected areas and said that a report would soon be submitted to the Centre, seeking financial assistance.