GST Council meet: Opposition states press for revenue protection, consumers' interest, say sources

At the 56th meeting of the GST Council, Opposition-governed states have requested measures for revenue protection and consumer safeguards, as per insider sources. The proposed GST revamp, which aims to streamline the tax structure into two categories, 5% and 18%, could result in reduced prices for essential goods and electronics, while imposing higher taxes on luxury items.

These states have emphasized the importance of ensuring companies do not exploit lower GST rates for profit, insisting that any benefits should directly benefit consumers. They are also advocating for a transparent compensation plan to prevent significant revenue shortfalls for states. Some states ruled by the BJP have also raised concerns about potential losses due to the revised tax slabs.

The 56th meeting of the GST Council, headed by Finance Minister Nirmala Sitharaman and including state ministers, commenced discussions on 'next-gen GST' reforms, focusing on reducing tax rates for essential goods, eliminating duty inversion in sectors such as textiles, and easing compliance burdens for MSMEs.

The Council will be deliberating on a proposal to streamline the GST rate structure over the next two days. The plan includes consolidating the slabs to just two: 5 per cent and 18 per cent, with the aim of eliminating the 12 per cent and 28 per cent slabs. Additionally, a special 40 per cent tax is being considered for certain items such as tobacco and ultra-luxury goods.

Under the proposed changes, around 99 per cent of items currently taxed at 12 per cent, including butter, fruit juices, and dry fruits, will be moved to the 5 per cent tax bracket. Furthermore, approximately 90 per cent of items currently in the 28 per cent category, such as electronic items like ACs, TVs, fridges, washing machines, and goods like cement, will see a reduction to the 18 per cent tax slab.

Andhra Pradesh Finance Minister Payyavula Keshav stated that his state is backing the Centre's proposal for GST rate rationalisation as part of the alliance with the BJP-led NDA government. Keshav emphasized the benefits of the proposal for the common man during a meeting with reporters prior to the Council meeting. Following Prime Minister Narendra Modi's announcement of the GST reform plan in his Independence Day speech, the central government shared the reform blueprint with a Group of Ministers (GoM) from various states for initial review.

According to the Centre's plan for GST reforms, a variety of sectors including textiles, fertiliser, renewable energy, automotive, handicrafts, agriculture, health, and insurance are expected to benefit significantly from the recent rate overhaul. Ahead of the Council meeting, eight states governed by opposition parties, namely Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal, convened their own meeting to strategize and reiterate their request for revenue protection before endorsing the rate adjustments.