GST Council Meets to Discuss Major Rate Changes
The 56th GST Council, chaired by Finance Minister Nirmala Sitharaman, began a two-day meeting in New Delhi on September 3. The meeting includes representatives from the Centre and states to discuss major reforms in India’s indirect tax system.
Simplifying the Tax Structure
One of the key proposals is to replace the current four-tier GST system with a simplified two-slab model. The new structure under discussion includes a 5% rate for essential items and an 18% rate for most goods. Luxury and sin goods, such as premium vehicles, tobacco, and pan masala, may be taxed at 40%.
Broad-Based Tax Cuts
The Council is also considering rate reductions on nearly 175 consumer items. These include everyday products like shampoo, toothpaste, and talcum powder, as well as consumer electronics such as televisions and air-conditioners. Small hybrid cars are also part of the list. Prime Minister Narendra Modi recently described this as a “Diwali relief” move.
State Revenue Concerns
Opposition-led states, including Karnataka and Kerala, have raised concerns over revenue losses, estimating a shortfall of up to ₹2 trillion annually. They are pressing for a compensation mechanism, possibly through a cess on luxury and sin goods.
Market and Consumer Outlook
Markets reacted positively ahead of the reforms, with gains in auto, consumer goods, and electronics sectors. Analysts believe that the proposed GST cuts of 7–10% could boost consumption, particularly ahead of the festive season.
