The Estimates Committee of the Kerala State Legislative Assembly has voiced significant concerns, noting that the Goods and Services Tax (GST) system has failed to bring the anticipated advantages to the state. In response, the committee has formally requested a thorough comparative analysis of Kerala’s tax revenue growth both before and after GST implementation. This study would also project what the state’s revenue might have been if GST had never been introduced.
This crucial report, covering the 2023-2026 period, was recently presented to the Assembly on October 7. The committee is now pushing for an urgent response and detailed findings from the government on this matter.
Among its key recommendations, the committee has urged the government to implement an e-way bill system specifically for gold and other precious metals. Furthermore, they emphasized the need for stricter enforcement measures through consistent inspections and proactive steps to prevent tax revenue losses from online transactions.
Concerns Over Revenue Loss
The committee highlighted that the delay in rolling out e-way bills for gold and other precious metals is directly contributing to significant revenue losses for Kerala. Interestingly, neighboring states like Karnataka are reportedly capitalizing on this gap. While the e-way bill system for inter-state movement of goods exceeding ₹50,000 was introduced nationwide on April 1, 2018, and became mandatory for intra-state movement of goods above ₹50,000 from April 15, 2018, its specific application to precious metals in Kerala remains a critical unmet need.
Additionally, the committee advocated for the immediate establishment of State tribunals under the GST framework. They also recommended a GST waiver for infrastructure projects funded by MLA and MP allowances, aiming to streamline development efforts.
Kerala’s initial optimism about benefiting as a consumer state under the GST regime has, according to the committee, largely gone unfulfilled. Despite an overall increase in tax revenue over the years, the state has not achieved the anticipated growth. The committee, led by MLA K.K. Shailaja, pointed out that since GST’s introduction in 2017, certain tax revenue streams have declined, and some trade sectors have experienced outright losses. This challenging backdrop underscores the urgency of their recommendation for a detailed comparative study of pre- and post-GST revenue figures, along with an assessment of potential revenue if GST had not been adopted.
Analyzing Non-GST Revenue Streams
The report indicates that Kerala’s GST revenue saw a rise from ₹12,007.7 crore in 2017-18 to ₹30,944.48 crore by 2023-24. Concurrently, non-GST revenues, including collections from Kerala General Sales Tax and Value Added Tax, also increased from ₹24,580.7 crore to ₹27,626.61 crore during the same timeframe.
To further combat tax evasion, the committee proposed making sector-specific inspections a routine practice. They cited “Operation Palm Tree” in 2024, which exposed fraudulent dealings in the metal scrap trade, as a prime example of the effectiveness of such raids. The committee emphasized that these inspections should be conducted simultaneously across all relevant locations for maximum impact.