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Informist, Thursday, Aug. 21, 2025

 

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--Bengal minister: Rate rationalisation GoM yet to decide item wise GST cut  
--Bengal minister: Told GoM to amend GST law to hike tax on luxury items 
--Bengal minister: Suggested extra tax on luxury items 
--Bengal Minister: GST Council must see how revenue loss can be mitigated 
--UP minister: Excessive luxury items to attract 40% GST

 

NEW DELHI – While the Group of Ministers on goods and services tax rate rationalisation welcomed and supported the Centre's proposal to lower tax burden on consumers, West Bengal Finance Minister Chandrima Bhattacharya Thursday said that she proposed an additional levy on items that would attract 40% GST rate that currently face compensation cess, to ensure tax incidence.

 

 

Bhattacharya, who is part of the rate rationalisation panel, said that she proposed luxury items and sin goods like expensive cars, tobacco, pan masala, attract higher taxes to balance revenue shortfall. "Of course there will be revenue shortfall from the overall rate reduction exercise, but items already attracting higher taxes should continue to attract higher taxes," she said. Many states have spoken in favour of her proposal, she added, without identifying those states. 

 

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 Bihar Deputy Chief Minister Samrat Choudhary. 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 are the other members.

 

The compensation 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. This compensation cess levy is set to end on March 2026. 

 

The Centre has initiated an overhaul of GST structure and proposed a move to two slab structure instead of the current four-slab structure. Under this, the Centre has decided to move items attracting 12% tax to either 5% or 18%. For the items attracting 28% GST currently, many of which are sin goods and attract compensation cess, Centre has proposed a 40% tax.

 

According to Bhattacharya, even after imposing a 40% GST after the rate-changing exercise, many luxury and sin goods will attract a lower tax than it is currently doing once cess levy ends and so an extra tax should be imposed. "Sin goods should be taxed higher (than 40%). Besides, it will lead to a lot of revenue shortfall," she said, adding that the GST Council and the Centre should also look at ways in which states' shortfall in tax collection in post GST-regime can be mitigated. She also added that necessary changes must be made to the GST law to ensure the proposed higher taxes on luxury and sin goods. 

 

Telangana Deputy Chief Minister and Finance Minister Bhatti Vikramarka Mallu also resonated with Bhattacharya and said that GST rate rationalisation should happen but with a proper compensation mechanism. He proposed that either the present compensation cess be continued and amount collected be given fully to the respective states or while dispensing with compensation cess, the GST rates on sin or luxury goods may be increased to their present levels and the additional amount collected may be given to the respective states.

 

The current 28% GST slab has a host of luxury items and white goods which may be moved to 40% GST, Uttar Pradesh Finance Minister Suresh Khanna said. The ministerial panel held their first meeting in eight months Thursday and days after Prime Minister Narendra Modi announced from the ramparts of Red Fort a "Diwali Gift" for Indians in the form of lower GST.

 

The Group of Ministers' report – which will include a dissent note by West Bengal minister – will be submitted to the GST Council, which will take a final call on the proposals. Bhattacharya's dissent note will be to highlight the potential revenue hit from the sweeping GST rate-changing exercise. The council is expected to meet in Sept-Oct.  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Akul Nishant Akhoury

 

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