The proposal to do away with the 12 percent and 28 percent Goods and Services Tax rates received backing from the Group of Ministers on Thursday, along with a few suggestions. The matter will now be placed before the GST Council for a final decision, building on Prime Minister Narendra Modi’s Independence Day commitment to streamline the country’s indirect tax framework.
If the proposal is approved, the current four-tier structure would be narrowed down to just two standard rates of 5 percent and 18 percent. An additional 40 percent rate may also be introduced for high-end luxury items.
The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising finance ministers from all states, will assess the feedback submitted by the panel. Among the key concerns are the revenue implications for states and the issue of compensation.
Bihar Deputy Chief Minister Samrat Choudhary, who leads the GoM on Compensation Cess, Health and Life Insurance, and Rate Rationalisation, said the group discussed the proposals thoroughly. He noted that states shared their inputs and certain concerns have been passed on to the Council for further review.
“There were many suggestions from different states. Some have raised specific concerns. The matter has now been referred to the GST Council,” Choudhary said.
West Bengal Health Minister Chandrima Bhattacharya expressed apprehensions over the impact on state finances. Speaking after the meeting, she said, “I asked how the states would be compensated if revenue drops because of the revised tax rates. These points have been included in the report that will be forwarded to the Council.”
She also added that the exact revenue loss from these changes remains unclear. “There has been no proper estimate of the financial impact. We expect these details to come up in the Council meeting,” she said.
Uttar Pradesh Finance Minister Suresh Khanna echoed similar concerns, saying that the central presentation did not specify the potential revenue loss. However, he emphasized that any reform should aim to benefit the general public.
The proposed restructuring, first mentioned by Prime Minister Modi during his August 15 address, is part of a broader plan to simplify the GST structure and reduce litigation.
