GST Council begins key meeting to discuss Centre’s rate cut proposals

The Goods and Services Tax (GST) Council began its two-day meeting on Wednesday (September 3, 2025), with proposals on the agenda to rationalise GST rate slabs, reduce tax incidence, and simplify GST procedures.

The proposals before the Council — first mooted by the Union government on Independence Day — include reducing the number of GST rates by doing away with the 12% and 28% slabs as well as the Compensation Cess, while retaining the 5% and 18% slabs, and also introducing a new 40% rate.

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The GST Council will also deliberate upon the Centre’s proposals to simplify and speed up the GST registration, filing, and returns processes.

Common man to benefit

The Centre says the rate rationalisation will benefit “the common man, women, students, middle class, and farmers”, claiming that both common-man items and aspirational goods will see lower tax rates if its proposals are accepted by the GST Council.

According to sources, the proposal will see 99% of the items in the 12% slab moving to 5%, and 90% of the items in the 28% slab moving to 18%. The rest of the items in the 28% slab — mainly sin and luxury goods — will move to the 40% slab.

Though the Centre has not stated the likely revenue impact of these rate cuts, economists have projected annual revenue losses ranging between ₹60,000 crore to ₹1.8 lakh crore.

States’ concerns

The Finance Ministers of Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal — all non-BJP ruled States — met in New Delhi on Friday. They drafted a note laying out their concerns over the revenue shortfall due to these rate cuts and their proposals for how the Centre could protect States’ revenues. Those proposals, too, will be discussed by the GST Council during its ongoing meeting.

The Telugu Desam Party — which holds power in Andhra Pradesh and is a member of the ruling National Democratic Alliance at the Centre — has thrown its support behind the Union government’s proposals.

“As an alliance partner, we are supporting the Centre’s proposal of GST rate rationalisation,” Andhra Pradesh Finance Minister Payyavula Keshav told reporters ahead of the Council meeting. “It is in favour of the common man.”