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Informist, Friday, May 23, 2025

NEW DELHI – Finance Minister Nirmala Sitharaman will likely chair the next GST Council meeting "very soon", and may take up the issue of rate rationalisation and simplification of the tax structure, a senior government official said Friday. The Council, which has the mandate to meet every three months, had last met in December. Another official said that the next meeting could be in the second half of June. 

"There are three or four different aspects that need work to make GST (goods and services tax) simpler and leaner," the official said. "We will look into the issue of rate rationalisation and to make things simpler, also look at compensation cess future," the official added. 

GST rate rationalisation, the most-looked-forward to item on the Council's agenda, was taken up in the December meeting but no decision was taken as all members were of the view that more details need to be worked out before rate changes can be announced. "Until the rates are decided, it is best to avoid speculation," the finance minister had said after the Council meeting.

Bihar Deputy Chief Minister Samrat Choudhury heads the six-member Group of Ministers, tasked to recommending trimming the list of items exempt from GST, reassessing tax rates, and correcting inverted duty structures. As part of their recommendations, the panel had proposed in the interim 

report suggesting rate tweaks on 148 items that could likely help the government raise an additional INR 220 billion per year. The proposed changes aimed to raise taxes on luxury and sin goods on the one hand and provide relief on essential items on the other.

According to the government official cited above, the report needs to be studied more minutely in order to understand the full impact on the Centre and states' revenues. The panel had also suggested that the four-tier tax slab of 5%, 12%, 18% and 28% could continue and a new rate of 35% may be introduced for a niche category of items that earlier attracted a cess in addition to the GST rate.

And this is where the compensation cess panel comes in.

The Group of Ministers on compensation cess, headed by Minister of State for Finance Pankaj Chaudhary, which was initially scheduled to submit its report by Dec. 31, was given a six-month extension by the Council in December. Though the panel is now scheduled to submit the report by Jun. 30, the finance ministry official cited above said that the panel has barely met and so considerable work on that front remains to be done. 

The GST cess, which was introduced to compensate states for revenue losses in the initial years of the GST regime, is due to end in March 2026. The cess on certain luxury and sin items such as tobacco items, 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.

Though the collection of GST compensation cess was to be discontinued in June 2022, it was extended till March 2026 to repay the loans taken by the Centre to compensate for the fall in revenue collections during the COVID-19 pandemic.  End

Reported by Priyasmita Dutta

Edited by Deepshikha Bhardwaj

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