State report · Kerala State Planning Board, Government of Kerala · 2026-03

Kerala Development Report 2026 - chapter on mobilising finances (GST)

This development report by the Kerala State Planning Board reviews the state's fiscal path in its chapter on mobilising finances, and it is critical of the GST framework from a state's point of view. It argues that pooling taxation under GST, ending assured compensation while the cess continued, and tight borrowing limits have narrowed states' fiscal space. It also says IGST receipts fell short of expectations, citing the Kerala Public Expenditure Review Committee. It records that the state asked the Sixteenth Finance Commission to take the revenue impact of GST into account.

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Key findings and recommendations

  • States were compensated only for July 2017 to July 2022, and Kerala's requests to extend this were refused even though the cess continued until 2026.
  • Against actual 2022-23 collections of Rs. 29,513 crore, the report puts the state's GST shortfall at about Rs. 12,578 crore compared with protected levels.
  • The report expects the 56th Council rate rationalisation to cost Kerala about Rs. 6,300 crore a year in extra revenue loss.
  • It names systemic problems in IGST settlement as a continuing source of revenue loss.

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