‘The concern that the IMF has expressed, and which underlies the lowly ‘C’ grade, is not going to be hastily resolved’
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In a notification dated September 17, the Ministry of Finance notified that appeals against orders communicated before April 1, 2026, can be filed up to June 30, 2026.
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Finance Minister Nirmala Sitharaman chairs a meeting of Group of Ministers (GoMs) constituted by the GST Council on Compensation Cess, Health and Life Insurance, and Rate Rationalisation at Vigyan Bhawan, in New Delhi. File. Photo: X/@FinMinIndia via PTI

The story so far: The Group of Ministers (GoM) appointed by the Goods and Services Tax (GST) Council to look into the rationalisation of rates in GST says it has accepted the Union government’s proposals on how to go about the process. The GST Council said it will hold its next meeting on September 3-4 and discuss the proposals. The Union government had suggested rate changes that would not only simplify the GST structure, but would also go a long way in reducing the average effective tax rate.

What did the Union government propose on rates?

In his Independence Day speech, Prime Minister Narendra Modi announced a number of reforms, among which was a “Deepavali gift” of next-generation reforms to GST. In the days that followed, the government made clear what it was proposing: reducing the number of slabs in GST, and moving most items to lower rates.

The GST currently has at least seven different rates: 0.25%, 3%, 5%, 12%, 18%, 28%, and a compensation cess levied on the items in the 28% slab. The Union government proposed to reduce these to four: a rate of less than 1% for the items currently in 0.25% and 3% (diamonds, semi-precious stones, jewellery, and precious metals), 5%, 18%, and 40%. As per the proposal, 99% of the items currently in the 12% slab would move to 5%, and 90% of the items in the 28% slab would move to 18%. The remaining items in the 28% slab — mainly ‘sin’ goods and services such as tobacco, cigarettes, and online gaming — would move to a higher tax rate of 40%.

However, the thrust of the change is to ensure that vast majority of items would be in just the two slabs of 5% and 18%.

Why did the Centre have to propose this?

The GST Council has long been aware of the need to rationalise rates in GST, and had set up a GoM for the same purpose in September 2021. However, the GoM on rate rationalisation was composed entirely of representatives from the States. Therefore, in order to put its ideas across, the Centre needed to submit a proposal.

The GoM has accepted this proposal and has recommended it to the GST Council.

What does this mean for the common consumer?

According to a calculation by the State Bank of India’s economic research wing, if the proposals are accepted by the GST Council, the average tax rate under GST is expected to fall to 9.5% by 2026-27, from a notional rate of 14.4% in May 2017 and 11.6% as of September 2019.

The Union government has said it wants to reduce the tax on common-use items, which means that items like soap, toothpaste, and other toiletries — currently taxed at 18% — will be taxed at 5%. Common food items such as sugar, tea, coffee, edible oil, spices, along with lifesaving drugs and apparel less than ₹1,000 will remain in the 5% bracket.

Non-luxury cars, ACs and fridges — currently taxed at 28% plus a compensation cess — are expected to move to 18%.

What are the revenue implications?

According to economists, the hit to GST revenues could range between ₹1.1 lakh crore and ₹1.8 lakh crore, to be half borne by the Centre, and half divided across the States.

To put this amount in context, the Reserve Bank of India (RBI) transferred a record dividend of ₹2.69 lakh crore to the government for 2024-25.

Even if the Union government does not receive such a large dividend from the RBI this year, it will be able to quite comfortably absorb the revenue hit from the GST rate cuts.

The States, on the other hand, are more concerned. Kerala Finance Minister K.N. Balagopal, a member of the GoM on rate rationalisation, said the GoM has suggested to the GST Council that if the States incur any losses due to this rationalisation, there should be a mechanism to compensate them.

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Karnataka Revenue Minister Krishna Byre Gowda. File photo: Special Arrangement

Image for representation only
| Photo Credit: PTI

The Supreme Court on Friday (January 10, 2025) stayed showcause notices issued by GST authorities worth over ₹1 lakh crore to online gaming companies and casinos over alleged tax evasion.

A bench of Justices J.B. Pardiwala and R. Mahadevan said the matters required hearing and all proceedings against the gaming companies should remain stayed in the meantime.

Additional solicitor general N. Venkataraman, representing the GST department, said some showcause notices would come to an end in February.

The matter was posted on March 18.

GST authorities in October 2023 issued showcause notices to online gaming companies for tax evasion.

The government amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1, 2023 onward.

In August, 2023, the GST council clarified 28% GST would be levied on the full value of bets placed on online gaming platforms.

Gaming companies moved various high courts against such GST demands, contesting the claims of the revenue authorities.

The top court last year allowed a petition of the Centre and transferred to itself pleas, challenging the imposition of 28% GST on e-gaming firms, from nine high courts for an authoritative pronouncement.

Many online gaming firms like Games 24×7, Head Digital Works, Federation of Indian Fantasy Sports had moved the top court challenging the GST imposition.

The top court had stayed the Karnataka High Court verdict quashing the GST intimation notice to the tune of ₹21,000 crore issued to an online gaming firm.

Several proposals of Fitment Committee, comprising officials from the Centre and States GST Department would come up for review before the Council. File
| Photo Credit: The Hindu

The 55^th GST Council meeting which is expected to decide on reducing tax rate on health and life insurance, besides considering rate rejigs on 148 items began in Rajasthan’s Jaisalmer on Saturday (December 21, 2024.)

The GST Council, chaired by Union Finance Minster Nirmala Sitharaman and comprising her State counterparts, is also expected to deliberate on bringing Aviation Turbine Fuel (ATF) in Goods and Services Tax fold.

One of the major items on the agenda of the Council is to decide the GST rate on health and life insurance.

A Group of Ministers (GoM) set up by the Council under Bihar Deputy Chief Minister Samrat Chaudhary, in its meeting in November, had agreed on exempting insurance premiums paid for term life insurance policies from GST.

Also premium paid by senior citizens towards health insurance cover has been proposed to be exempted from the tax. Besides, GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to ₹5 lakh is proposed to be exempted.

However, 18% GST will continue on premiums paid for policies with health insurance cover of more than ₹5 lakh. A final decision of the insurance taxation under GST is likely on Saturday (December 21, 2024) as most States are in favour of lowering taxes on premium to give relief to the common man.

Several proposals of Fitment Committee, comprising officials from the Centre and States GST Department would come up for review before the Council. One of the proposals include cutting taxes on food delivery platforms such as Swiggy and Zomato, to 5% (without input tax credit), from the current 18% (with ITC).

It is likely to have proposed a rate hike on sale of used EVs as well as small petrol and diesel vehicles to 18% from the current 12%. This hike would bring used and old smaller cars and EVs at par with old larger vehicles, according to sources.

Editorial | Revenue repercussions: on GST revenue trends

Also, the GoM on GST compensation cess is likely to get a six-month extension till June 2025, to submit their report. The compensation cess regime comes to an end in March 2026, and the GST Council has set up a panel of Ministers, under Union Minister of State for Finance Pankaj Chaudhary, to decide the future course of the cess.

Another major item before the Council is the GST rate rationalisation panel’s report, which has suggested rate tweaks in 148 items. The GoM earlier this month decided to submit before the Council their recommendation to hike tax on sin goods, like aerated beverages, cigarettes, tobacco and related products, to 35% from the present 28%.

The four-tier tax slab of 5, 12, 18 and 28% under GST will continue and a new rate of 35% is proposed by the GoM only for sin goods. The GoM also decided to propose rationalising tax rates on apparel. As per the decision, ready-made garments costing up to ₹1,500 would attract 5% GST, those between ₹1,500 to ₹10,000 would attract 18%.

Garments costing above ₹10,000 would attract 28% tax. Currently, garments costing up to ₹1,000 attract 5% GST, while those above that attract 12%.

The GoM also proposed hiking GST on shoes above ₹15,000/pair from 18% to 28%. It also proposed hiking the GST rate on wrist watches above ₹25,000 from 18% to 28%.

“Some of the low hanging fruits in the 148 items that rate rationalisation panel has suggested may be decided in the meeting. But, no major big ticket rate rationalisation is expected,” an official said.

Asked about his views on rate rationalisation and whether he is in favour, Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said: “Taxation system should be more flexible and not be a burden on people. We will present our views.”

The GoM had proposed reducing GST on packaged drinking water of 20 litre and above to 5% from 18% and reducing tax rate on bicycles costing less than ₹10,000 to 5% from 12%. Also, GST on exercise notebooks would be reduced to 5% from 12%.

New Delhi:

Five accused in the fake goods and services tax (GST) billing scam in Gujarat were arrested by the Rajkot branch of the economic offences wing (EOW) today. The arrests happened after the police and EOW officials searched 14 locations simultaneously. A company linked to The Hindu journalist and key accused Mahesh Langa has come under scrutiny.

The locations included Bhavnagar, Jamnagar, Ahmedabad, Veraval, Kadi, Mehsana, Gandhinagar, Shapar, and Rajkot. The five suspects allegedly have a hand in creating fake bills and transactions.

Police inspector SM Jadeja said a GST fraud worth approximately Rs 60 lakh has been committed using a Rajkot-based company, Parmar Enterprises.

Deputy Commissioner of Police (Crime) Parthrajsinh Gohil said the Rajkot police received information 20 days ago about fraudulent transactions where fake bills were being generated by shell companies to pass on GST credits.

During investigation, they found that three companies — DA Enterprises, Aryan Associates, and Arham Steel — had already been checked by the Ahmedabad Crime Branch. Based on this information, the Rajkot Crime Branch took action.

Parmar Enterprises was also involved in GST fraud in other Gujarat cities including Mehsana, Junagadh, Gandhinagar, Rajkot, Gir Somnath, and Jamnagar.

DA Enterprises, a company linked to Mahesh Langa, was involved in a majority of the undisclosed transactions in the scam.

Mahesh Langa’s bail petitions were rejected, except for one in which a sessions court granted him bail. He remains in jail pending a high court decision on his bail, expected on Friday.

The police may question Mahesh Langa again, following the arrests by the Rajkot EOW in the GST scam. Parmar Enterprises was allegedly created using a fake rental agreement to obtain a GST number. This rental agreement was submitted along with the application for GST registration, leading to the creation of the ‘Parmar Enterprises’ GST number.

Using this fake company, several other companies participated in the GST fraud. The companies involved include Yash Developers, Ikara Enterprises, Civil Plus Engineering, Dhanshree Metal, DA Enterprises, Aryan Associates, Jyoti Infrastructure, Arham Steel, Riddhi Infrastructure, Ashapura Trading, Shiv Milan Plastics, Globetra Impex, Maa Durga Steel, Maruti Nandan Construction, and Lakhubha Nanbha.

Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs in a conversation with The Hindu in Chennai on September 21, 2024
| Photo Credit: Dinesh Krishnan

Union Finance Minister Nirmala Sitharaman on Saturday (September 21, 2024) said the Goods and Services Tax (GST) Council is looking at the GST rates, item by item, for rationalisation and the process was being discussed for a long time and delayed due to several factors including the impact of COVID-19.

In an interaction with senior journalists of The Hindu Group of Publications at The Hindu’s head office in Chennai, Ms. Sitharaman, while responding to a question on rationalisation of GST, said: “It has been delayed for a long time and it’s much overdue due to various factors including the impact of COVID-19, election in some States. Now there is the seriousness, saying we need to take this up. The committee [Group of Ministers committee on rate rationalisation] is looking into it item by item.”

On a question related to GST compensation and compensation cess, she said “Everyone knows that the GST compensation cannot continue after June 30, 2022, and that is by law. So paying off the compensation in the first five years after implementation of the GST continued and ended in June 2022. The cess continues to be collected. Whether it has to continue or not and the rate and items on which the cess should be levied is being discussed in the GST Council.”

According to her, “There are some States that want the GST compensation to continue. But, it cannot continue in the very spirit of how it was brought in. It was introduced to make sure that States don’t have any apprehensions about their revenue resources coming down to a drastically low level and that they cannot sustain themselves, after the implementation of the GST regime.”

Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs speaking at The Hindu office in Chennai on September 21, 2024
| Photo Credit:
M. Srinath

Ms. Sitharaman also pointed out that the GST compensation scheme was brought in at a fairly high rate. “No State was growing anywhere near 14%. Everybody who analyses the economy will know it. For instance, Tamil Nadu’s growth rate was around 6.5%, before 2017. The State would have earned around ₹4.23 lakh crore. Whereas, the State had earned ₹5.23 lakh crore, because of the compensation scheme and post that because of the GST. You [the State] are better off today. The wild allegations that come about the GST system will have to be countered with patience. But when it comes from a State government, whose Finance Minister is sitting in the [GST] Council, randomly because it politically suits them, I leave it as such. But it has no logic in it.”

She said the Constitution gives the Union government every right to levy cesses. “Though the money collected through cesses is not shared with the States directly through devolution, it goes for building roads, schools, ports and hospitals. It is perfectly constitutionally legitimate for the Centre to collect cess. It doesn’t go through the devolution which was designed by the Finance Commission, a constitutional body,” she added.

New Delhi:

The reconstituted Group of Ministers (GoM) on GST for rate rationalisation met for the first time on Thursday.

West Bengal finance minister Chandrima Bhattacharya says she has put in a request to reduce GST rates of 18 per cent on life and health insurance premiums.

She said, “I have placed the request of reducing GST on life and health insurance. I have been told that the fitment committee is looking into it.”

Krishna Byre Gowda, Karnataka Minister said, “We have discussed the issue of relaxation in GST rates on insurance; we have asked for more data on it”

On rate rationalisation or reducing the number of slabs under GST Bhattacharya said, “No member of the rate rationalisation committee is in favour of changing or reducing the number of current slabs under GST”

On changes in current GST slabs Krishna Byre Gowda, says, “Why disturb something which is going on smoothly.”

However, sources from the GoM told ANI that, this was the first meeting of the reconstituted GoM on rate rationalisation and no decision has been taken on reducing slabs, cutting GST rates on different items or reducing GST rate on life and health insurance premiums.

Proposals have come for reducing rates for Insurance, hospitality and beverages, and the online gaming sector, among many. The GoM for rate rationalisation was reconstituted in June 2024, after the formation of the new government at the centre and new state governments in Bihar, Andhra Pradesh and Telangana.

Bihar Deputy Chief Minister Samrat Chaudhary was appointed as the convenor of the GoM on GST rate rationalisation. The other members of the reconstituted panel are Uttar Pradesh Finance Minister Suresh Kumar Khanna, Goa Transport Minister Mauvin Godinho, and Rajasthan Medical, and Health Services Minister Gajendra Singh.

The GoM also include West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, and Kerala Finance Minister K N Balagopal.

GST rate rationalisation has been pending before the committee for a long time and it was anticipated that a decision would be taken regarding the fitment of the listed items under each GST slab. Particularly, products widely used by the public may be suggested for a transition from the 12% high-rate slab to the 5 per cent slab.

In the last GST Council meeting held on June 22, Finance Minister Nirmala Sitharaman announced several significant measures, including Aadhaar biometric integration, and exemptions in railway services, among others.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

The Goods and Services Tax (GST) has played a remarkable role in bringing down the country’s logistics cost, Economic Survey on July 22 said. File
| Photo Credit: The Hindu

The Goods and Services Tax (GST) has played a remarkable role in bringing down the country’s logistics cost, Economic Survey on July 22 said.

The ‘One Nation, One Tax’ regime has ensured that trucks do not have to wait for hours on State borders, which has brought down the travel time by up to 30%.

Also read: Economic Survey 2023-24 updates

“This has reduced the logistics cost and increased the average distance trucks travel from 225 km before GST to 300-325 km,” the Economic Survey 2023-24 tabled in Parliament said.

This has been a great value, adding to the ease of doing business and the growth of manufacturing in the country, it added.

The National Council of Applied Economic Research (NCAER) study of December last year has shown that the logistics cost in the economy has declined 0.8 to 0.9 percentage points of GDP between FY14 and FY22.

India’s position in the World Bank’s Logistics Performance Index (LPI) rose from 44th place in 2018 to 38th in 2023 out of 139 countries. This improvement is attributed to reduced logistics costs and better trade facilitation.

With the introduction of cargo tracking, dwell time in the eastern port of Visakhapatnam came down from 32.4 days in 2015 to 5.3 days in 2019. Additionally, the country’s position in international shipments climbed to 22 in 2023 from 44 in 2018 due to its modernisation and digitalisation efforts.

India moved up five places in infrastructure score and four places up to 48 in logistics competence and equality.

India aims to be in the top 25 countries on the LPI by 2030.