Dharamani warns of ₹1,000 crore annual revenue loss for Himachal after GST rationalisation, seeks compensation for eco-friendly states

State Finance Minister Rajesh Dharmani on Saturday cautioned that Himachal Pradesh could face an annual revenue loss of over ₹1,000 crore once Goods and Services Tax (GST) rates are rationalised. His remarks come ahead of the GST Council’s upcoming meeting on September 3–4, where the issue of rate rationalisation is on the agenda.

The Centre has proposed reducing the existing four GST slabs—5%, 12%, 18% and 28%—to just two: 5% and 18%, with a special 40% slab for sin and luxury goods.

Supporting the two-slab structure with the higher rate on luxury and sin goods, Dharmani stressed that reforms must be designed to ensure benefits reach consumers directly rather than boosting corporate profits. He also called for a compensation mechanism to offset states’ revenue losses for at least the first five years or until revenues stabilise.

“The Centre has not yet shared any framework to ensure that the benefits of rationalisation are passed on to the common man. How will they guarantee that reduced rates actually translate into lower prices for consumers? There must be a mechanism to prevent undue profiteering by companies,” Dharmani said.

Highlighting environmental concerns, the Finance Minister urged the Centre to create a special compensation framework for eco-friendly states like Himachal Pradesh, which play a crucial role in preserving green zones. He drew attention to the state’s vulnerabilities, pointing out 26 incidents of cloudbursts that have claimed nearly 350 lives, with Mandi, Chamba and Lahaul-Spiti among the worst affected.

Dharmani further suggested introducing an additional slab for “red-category industries” that cause severe environmental pollution.

On Friday, finance ministers and representatives from eight opposition-ruled states met in Delhi and finalised a joint proposal to be presented before the GST Council, demanding that state governments be compensated for revenue losses arising from GST rationalisation.