The Himachal Pradesh government, during the 57th meeting of the GST Council on Thursday, raised the issue of full compensation for revenue implications arising from GST implementation to safeguard its fiscal stability.

The meeting, organised under the chairmanship of Union finance minister Nirmala Sitharaman at Bharat Mandapam, New Delhi, saw Himachal Pradesh reiterating that state revenues should be protected by ensuring a 14% year-on-year growth for five years, and thereafter, revenue protection should continue until the actual revenue of the state reaches the level of the protected revenue determined for the fifth year.

The proposal for the constitution of a group of ministers on hilly states was reiterated. Furthermore, the state highlighted the need to correct rate inversion in the pharmaceutical sector by reducing tax rates on active pharmaceutical ingredients (APIs). Such rationalisation would help minimise the inverted duty structure, reduce the accumulation of input tax credit and associated refund claims, and provide further impetus to domestic API manufacturing and the pharmaceutical industry, it said.

While welcoming overall GST reforms, the state government also welcomed proposals providing relief to small taxpayers and measures relating to defence and CSD canteens. The state-specific issue concerning the leasing of the right to collect toll was also deliberated upon, and the proposed GST exemption relating to the state’s toll collection mechanism was welcomed.

While supporting measures that facilitate genuine taxpayers, the state emphasised that GST reforms must maintain an appropriate balance between ease of compliance and effective enforcement. Proposals that could weaken enforcement, facilitate fraudulent practices, or adversely affect legitimate revenue should be carefully reviewed to ensure that taxpayer facilitation does not come at the cost of revenue protection and tax evasion prevention.