NEW DELHI, September 3 — The 56th meeting of the Goods and Services Tax (GST) Council commenced in New Delhi today, with Union Finance Minister Nirmala Sitharaman chairing discussions on a sweeping overhaul of India’s indirect tax regime. The Council, comprising finance ministers from all states and union territories, is considering a proposal to simplify the GST structure by reducing the existing four tax slabs to a streamlined two-rate system.
Under the proposed reform, the current 5%, 12%, 18%, and 28% slabs would be consolidated into two primary rates—5% for essential and mass-consumption items, and 18% for standard goods and services. Additionally, a special 40% rate is being considered for luxury and demerit goods such as tobacco, pan masala, and high-end automobiles.
The Centre’s blueprint, vetted by a Group of Ministers (GoM), also seeks to address the issue of duty inversion—where input taxes exceed output taxes—particularly in sectors like textiles, fertilizers, renewable energy, and electronics. Nearly 99% of goods currently taxed at 12%, including butter, fruit juices, and dry fruits, are proposed to shift to the 5% slab. Similarly, around 90% of items in the 28% category, such as televisions, refrigerators, washing machines, and cement, may move to the 18% slab.
Opposition-ruled states have expressed concern over potential revenue losses resulting from the rate rationalisation. In a pre-meeting huddle, eight states—Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal—demanded a compensation mechanism to offset the fiscal impact. Jharkhand Finance Minister Radha Krishna Kishore estimated a ₹2,000 crore revenue loss for his state if the reforms are implemented without safeguards.
Andhra Pradesh, represented by Finance Minister Payyavula Keshav, has endorsed the Centre’s proposal, citing its benefits for the common man. The Telugu Desam Party (TDP), an NDA ally, has pledged support for the rate rationalisation agenda.
The GST Council is expected to continue deliberations over the next two days, with final recommendations likely to be announced later this week. If approved, the reforms would mark the most significant restructuring of GST since its rollout in July 2017, aiming to reduce compliance burdens, enhance consumption, and improve tax efficiency across sectors.
