GST Rejig
Council OKs 5%, 18%, 40% rates, to be effective from Sept 22
This story was originally published at 00:05 IST on 4 September 2025
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--Bengal Minister: GST Compensation cess to be discontinued from Nov
--Himachal Minister: Council decided to discontinue 12%, 28% GST rates
--Bihar Minister: New GST rates to come into effect from Sept. 22
--Himachal Minister: To get INR 450 bln from GST on sin, luxury items
--Sitharaman: Tariff issue didn't prompt GST reforms
NEW DELHI – Turning out to be a landmark meeting, the GST Council Wednesday approved a move to a two-slab goods and services tax rate structure with a new special tax of 40% to be effective from Sept. 22. The total loss of revenue from the entire rate change process will be INR 930 billion, but INR 450 billion revenue will come from the new 40% tax on sin and luxury goods which will mitigate some of the revenue shortfall, said Rajesh Dharmani, minister of technical education, vocational and industrial training of Himachal Pradesh, after the council meeting.
The Council also decided to discontinue GST compensation cess levy from November once the back-to-back loans are repaid, said Chandrima Bhattacharya, finance minister of West Bengal. No new mechanism has been decided yet to compensate states for the further revenue loss, ministers from states said after the Council meeting, she added.
The council Wednesday decided to slash GST on host of times and brought 99% of items from the 12% tax slab to the 5% slab and almost 90% of items under the 28% tax slab to the 18% tax slab. Of the exhaustive list of items that saw rate reduction, the council also decided to slash to nil the 18% GST paid on life and health insurance premiums paid by individuals.
These changes are part of Prime Minister Narendra Modi's next-generation reforms, announced on Independence day, to boost domestic demand in the economy, businesses and micro, small and medium enterprises. The government's thrust on next-generation reforms and support to small businesses come amid exogenous risks to economic activity from the US tariff-related uncertainty. The Indian economy, particularly exports and capital formation, faces risks from the imposition of tariffs by the US.
Finance Minister Nirmala Sitharaman, however, later said at the press briefing that tariff related uncertainties did not prompt the GST rejig. End
Reported by Priyasmita Dutta and Sagar Sen
Edited by Akul Nishant Akhoury
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