NEW DELHI: The 56th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman and including state finance ministers, commenced on Wednesday to deliberate on “next-generation GST” reforms. The proposed changes aim to lower tax rates on widely consumed items, eliminate duty inversion in sectors such as textiles, and ease compliance for MSMEs.
Over the next two days, the Council will discuss reducing GST slabs from four to two — 5 per cent and 18 per cent — effectively removing the 12 per cent and 28 per cent rates. A special 40 per cent levy is also being proposed on select items, including tobacco and ultra-luxury goods.
Under the Centre’s proposed rate changes, reviewed by a panel of state finance ministers, nearly 99 per cent of items currently in the 12 per cent bracket — including butter, fruit juices, and dry fruits — would shift to the 5 per cent slab. Similarly, about 90 per cent of goods in the 28 per cent category, such as ACs, TVs, fridges, washing machines, and cement, would move to 18 per cent.
While opposition-ruled states have stressed the need for revenue compensation post-GST revision, Andhra Pradesh Finance Minister Payyavula Keshav expressed support for the Centre’s proposal. “As an alliance partner, we support the GST rate rationalisation. It benefits the common man,” he said. Andhra Pradesh’s TDP is part of the BJP-led NDA at the Centre.
Prime Minister Narendra Modi had announced the GST reform plan in his Independence Day address on August 15, followed by the release of a detailed blueprint for review by a Group of Ministers from various states. Eight sectors — textiles, fertiliser, renewable energy, automotive, handicrafts, agriculture, health, and insurance — are expected to benefit most from the rate overhaul.
On Wednesday morning, eight opposition-ruled states — Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal — met separately to align their strategy and reiterated the demand for revenue protection before approving the proposed rate changes. Jharkhand Finance Minister Radha Krishna Kishore said his state could face a Rs 2,000 crore revenue loss if the reforms are implemented. He added that approval would be forthcoming if the Centre agrees to compensation.
Currently, the 18 per cent GST slab accounts for 65 per cent of total collections, the 5 per cent slab contributes 7 per cent, the 28 per cent bracket on luxury and sin goods contributes 11 per cent, and the 12 per cent slab makes up 5 per cent.
The Centre’s reform proposal rests on three pillars: structural reforms, rate rationalisation, and ease of living. Structural reforms aim to provide stability and predictability through long-term clarity on rates and policies, building industry confidence and facilitating better business planning.
The “ease of living” component includes seamless, technology-driven GST registration, particularly for small businesses and startups, pre-filled GST returns, and faster automated processing of refunds for exporters and those affected by inverted duty structures.
“The next-generation GST reforms will create a transparent, open economy and, with reduced compliance burdens, make it easier for small businesses to thrive,” Sitharaman had said on Tuesday at City Union Bank’s Foundation Day celebrations in Tamil Nadu.
