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Informist, Tuesday, Aug. 25, 2026

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI – The average goods and services tax rate fell below 10% following last year's overhaul of the GST rate structure and is likely to stay around that level over the next two to three years, a senior finance ministry official said. The GST Council is unlikely to make further changes to the GST structure and rates for the next few years, as data show the new structure has stabilised, with demand picking up in sectors like automobiles and consumer goods, the official said. 

 

"With almost one year's data available, we can see that the broad intent of the rate changes has yielded results," the official told Informist, adding that GST collections have held up for both the Centre and states despite the economy battling with numerous exogenous issues, including the war in West Asia. "Given this dynamic, neither states nor the Centre want to touch rates further," the official said. 

 

In September, the GST Council overhauled the indirect tax regime by collapsing the four-slab GST structure of 5%, 12%, 18%, and 28% into a two-slab structure of 5% and 18%. The council also introduced a new GST rate of 40% for sin and luxury goods. The GST Council anchored the tax changes on FY24 consumption data, the last available full-year bifurcated data on item-wise GST spent by consumers at that time. 

 

"Given the new rates and consumption pattern seen over the last year, the average rate is below 10%," the official said. 

 

The average GST rate for FY24 was 11.6%, much lower than the revenue-neutral rate of around 15% estimated when the GST regime was introduced in 2017. A committee headed by then chief economic adviser Arvind Subramanian suggested the revenue-neutral rate. In FY24, 70–75% of the total GST collections came from the 18% slab, followed by 13–15% coming from the 28% slab, 6–8% coming from the 5% slab, and 5–6% coming from the 12% slab.

 

At the time of rolling out the GST rate changes last year, the government had estimated a net revenue loss of INR 480 billion, which it had hoped would be compensated by an uptick in domestic demand and GST collection from the 40% GST bracket, which includes aerated drinks, non-alcoholic beverages, big cars and bikes, and tobacco products, among others.

 

Total GST collections grew 10.1% in the first four months of FY27 to INR 8.43 trillion, nearly double the budgeted growth pace of 5.3% for FY27. Post-settlement revenue of states grew 17% during Apr-Jul to INR 3.92 trillion. Last year, the overall GST collections grew 9.4% to INR 22.09 trillion.

 

The proposal to bring fuel items under the ambit of GST is also off the table for at least another two to three years, as the Centre and states are worried about the huge revenue implications of such a move,

the official said. "Excise duty and value added tax on petrol, diesel and aviation turbine fuel form a significant portion of states' revenues... after the huge changes last year, states will not be open to such a move at all," the official said.

 

Data from the Petroleum Planning & Analysis Cell shows that state governments collected INR 2.93 trillion in FY24 from sales tax and VAT on fuel, while the Centre collected INR 2.74 trillion. If petroleum products are brought under GST, the Centre and states would lose revenue because the current GST structure does not allow taxing these items as heavily as they are taxed now. A high GST rate on fuel products will also have political implications, the official said. 

 

Within fuel products, the official said that the only product on which states and the Centre can form consensus is ATF. The proposal to bring ATF under GST was taken up at the 55th GST Council meeting in December 2024, but due to a lack of consensus, it fell through, and the item remains outside the GST structure. 

 

But even that proposal is unlikely to be tabled before the Council anytime soon, the official said, adding that rates are no longer the Council's top agenda. The GST Council's next focus is process reforms to promote ease of doing business and widen the GST base. At the end of June, there were 16.71 million active GST taxpayers, with 3.9 million migrating from the pre-GST era.  End

 

Edited by Saji George Titus

 

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