Informist, Friday, Aug. 22, 2025

NEW DELHI - The GST Council will hold its 56th meeting on Sept. 3-4 in the national capital, Revenue Secretary Arvind Shrivastava said in an office memorandum Friday. The meeting assumes significance after Prime Minister Narendra Modi's announcement from the ramparts of the Red Fort on Independence Day about the government's "Diwali Gift" in the form of lower goods and services taxes. The Centre has initiated an overhaul of the indirect tax structure which will include rationalisation of the number GST rates slabs from four to two.

The council had last met in Jaisalmer in December. A day ahead of the two-day council meeting next month, state and central revenue officers will hold a meeting, the office memorandum said. Meetings on all three days will begin at 1100 IST, it added.

Although the Centre is yet to communicate the agenda of the meeting to states, there are three big-ticket items on its plate -- GST rates and slab rationalisation, cutting GST on health and life insurance premiums for individuals, and determining future of compensation cess.

In its recommendation to the Group of Ministers on rate rationalisation, the Centre has suggested doing away with the 12% and the 28% tax slabs. "All states have welcomed the proposal as it is consumer-friendly," Bihar Deputy Chief Minister Samrat Choudhary, convenor of the panel, said Thursday after the ministerial panel's meeting. Many states have agreed to the plan irrespective of the revenue implications it may have, he added.

The Centre has proposed to bring 99% of items under the 12% tax slab to the 5% slab and almost 90% of items under the 28% tax slab to the 18% tax slab. Currently, 65% of the total GST revenue comes from items falling under the 18% tax slab and 11% revenue is collected from items under the 28% slab. Only 7% and 5% GST is collected from items under 5% and 12% tax slabs, respectively. The Group of Ministers on GST rate rationalisation has accepted the Centre's proposal to shift to a two-slab GST structure, he added.

A six-member Group of Ministers was tasked to recommend trimming the list of items exempt from GST, reassess tax rates, and correct the inverted duty structures. The Group of Ministers on rate rationalisation is headed by Choudhary and includes Kerala Finance Minister K.N. Balagopal, Uttar Pradesh Finance Minister Suresh Kumar Khanna, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Rajasthan Medical and Health Services Minister Gajendra Singh.

Another Group of Ministers on Life and Health Insurance, which also held their meeting this week on Wednesday, has favoured exempting from GST the premiums paid by individuals on these insurance products. Currently, premiums paid on health and life insurance policies attract 18% GST. This panel, which includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana, has been mandated to submit its report to the GST Council by the end of October.

A third Group of Ministers on GST compensation cess, which met on Wed-Thu this week, could not arrive at any meaningful alternative for compensation cess once its levy ends.

The GST Council had decided to form a panel on compensation cess last September, headed by Minister of State for Finance Pankaj Chaudhary, to determine the future of compensation cess once its levy stops in March 2026. The panel has representation from Punjab, Madhya Pradesh, Assam, Chhattisgarh, Karnataka, Tamil Nadu, West Bengal, Gujarat, and Uttar Pradesh.

Initially set to expire in June 2022, the cess was extended until March 2026 to repay INR 2.69 trillion in loans taken by the Centre to compensate states for revenue losses during the COVID-19 pandemic. However, there is a possibility that the dues will be repaid a few months before, leading to confusion over what would happen to the excess funds accumulated.

The compensation cess on certain luxury and sin items such as tobacco products, motor vehicles, expensive motorcycles, caffeinated beverages and aerated drinks was introduced in 2017 to compensate states for the potential revenue losses in the first five years of the new GST regime. End

Reported by Priyasmita Dutta

Edited by Ashish Shirke

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