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SBI’s latest report says GST rationalisation will cause only ₹3,700 crore revenue loss, with no fiscal deficit impact, while reducing inflation and boosting growth and banking efficiency.

GST reforms will cause Rs 3,700 crore revenue loss to govt: SBI report

SBI&rsquo;s latest report says GST rationalisation will cause only ₹3,700 crore revenue loss, with no fiscal deficit impact, while reducing inflation and boosting growth and banking efficiency.

The State Bank of India (SBI) in its latest research report said that reforms in GST through reduction in rates will cause a minimal revenue loss of Rs 3,700 crore.
The government estimates the net fiscal impact of GST rates rationalisation will be Rs 48,000 crore on an annualised basis.
According to the report, given the growth and consumption boost, the minimal revenue loss is estimated at Rs 3,700 crore and will have no impact on the fiscal deficit.
At the 56th meeting of GST Council held few days ago, the current four-tier structure has been replaced with a two-tier one, with a standard rate of 18 per cent and five per cent, and de-merit rate of 40 per cent on selected few goods and services.
The report said that the GST rate rationalisation will largely have a positive impact on the banking sector due to meaningful cost efficiencies.
GST rate rationalisation has also brought down the effective weighted average rate from 14.4 per cent at the time of inception in 2017, which is expected to come down to 9.5 per cent, the report said.
When GST was introduced, the four rates were five per cent, 12 per cent, 18 per cent and 28 per cent.
Since the GST rate rationalisation of essential items (around 295) has declined from 12 per cent to five per cent or zero, the CPI inflation in the category may also come down by 25 basis points to 30 basis points in the current financial year, the report said.
Overall, the CPI inflation may be moderated in the range of 65 basis points to 75 basis points over 2026-27, according to the report.&nbsp;

CM Yogi Adityanath hailed the new GST reform as a transformative move, simplifying tax into two slabs, boosting jobs, consumption, and business confidence, while thanking PM Modi and FM Sitharaman for their visionary leadership.

UP CM Yogi Adityanath hails GST reform as a milestone towards Swadeshi and self-reliance

CM Yogi Adityanath hailed the new GST reform as a transformative move, simplifying tax into two slabs, boosting jobs, consumption, and business confidence, while thanking PM Modi and FM Sitharaman for their visionary leadership.

Uttar Pradesh Chief Minister Yogi Adityanath has welcomed the landmark decision on GST reform, expressing gratitude to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman for what he described as visionary leadership.
He said the reform marks the beginning of a new chapter in India&rsquo;s tax system.
&ldquo;The Next Generation GST Reform, announced by the Prime Minister on Independence Day, is now becoming a reality. This is not merely a tax reform, but a decisive step towards positioning India as a leading global economy with a high growth trajectory,&rdquo; the Chief Minister said.
&nbsp;
<blockquote class="twitter-tweet">
स्वाधीनता दिवस के अवसर पर <a href="https://twitter.com/hashtag/NextGenGST?src=hash&amp;ref_src=twsrc%5Etfw">#NextGenGST</a> Reforms का जो संकल्प आदरणीय प्रधानमंत्री श्री <a href="https://twitter.com/narendramodi?ref_src=twsrc%5Etfw">@narendramodi</a> जी ने देश वासियों के सामने रखा था, आज वह धरातल पर उतरता हुआ दिखाई दे रहा है... नए GST सुधार खपत और मांग को गति देंगे, जिससे अर्थव्यवस्था मजबूत, स्थिर और समावेशी बनेगी... <a href="https://t.co/rXNJgo2lqQ">pic.twitter.com/rXNJgo2lqQ</a>
&mdash; Yogi Adityanath (@myogiadityanath) <a href="https://twitter.com/myogiadityanath/status/1963613592978125059?ref_src=twsrc%5Etfw">September 4, 2025</a></blockquote>
&nbsp;
&nbsp;
Yogi Adityanath underlined that the reform would boost the spirit of Swadeshi and self-reliance while driving demand across sectors such as automobiles, consumer durables, and construction, thereby creating lakhs of jobs.
Under the new framework, GST has been simplified into two slabs&mdash;5% and 18%. Essential commodities will remain under the 5% category, while a limited set of luxury items will attract up to 40% tax. Food, medicines, and educational materials placed in the 0&ndash;5% bracket are expected to reduce household expenditure, improve purchasing power for middle- and lower-income families, and stimulate consumption.
The Chief Minister said the reform will not only simplify taxation but also accelerate India&rsquo;s growth story, helping the country progress toward becoming a global economic powerhouse.
CM Yogi added, "This reform will empower farmers, women, youth, MSMEs, and small traders alike. Provisions such as faster refunds and easier registration will provide strong support to small entrepreneurs and startups, further elevating the Ease of Doing Business in India."
He also highlighted that resolving the inverted duty structure, addressing classification disputes, and ensuring a transparent tax regime would strengthen business confidence. With consensus achieved between the Centre and states, he said, the reform is both comprehensive and widely acceptable.
Pointing to economic progress under the current government, Yogi Adityanath noted that wholesale inflation has been reduced to below 2% in recent years. He said the new GST reforms will accelerate demand and consumption, making the economy stronger, more stable, and more inclusive.
On behalf of Uttar Pradesh&rsquo;s 25 crore citizens, the Chief Minister expressed gratitude to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman for what he called an &ldquo;unprecedented and revolutionary decision.&rdquo;

From September 22, hotel rooms with tariffs up to Rs 7,500 will attract a lower GST of 5%, a move expected to make stays more affordable and boost domestic tourism.

GST bonanza: Hotel rooms up to Rs 7,500 tariff to become cheaper, drive tourism

From September 22, hotel rooms with tariffs up to Rs 7,500 will attract a lower GST of 5%, a move expected to make stays more affordable and boost domestic tourism.

Hotel rooms with tariffs up to Rs 7,500 per day are set to become cheaper as they will attract a lower GST rate of 5 per cent, without input tax credit (ITC), from September 22, a move expected to boost tourism, hospitality industry players said on Thursday.
Currently, hotel rooms with daily tariff of up to Rs 7,500 attract 12 per cent goods and services tax (GST) with input tax credit.
The GST Council on Wednesday cleared sweeping changes to the indirect tax regime, approving an overhaul of rates by limiting slabs to 5 per cent and 18 per cent effective from September 22, the first day of Navaratri.
"The... move that will act as a stimulus to the Indian economy by boosting discretionary income and fuelling consumption across sectors. For travel and tourism, the cut in GST on hotel rooms priced below Rs 7,500 will make stays more affordable for a large share of Indian travellers, reinforcing demand in the domestic market," Rajesh Magow, Co-Founder and Group CEO, MakeMyTrip, said.
Nikhil Sharma, Managing Director &amp; COO, South Asia, Radisson Hotel Group, welcomed the GST Council's "progressive step", describing it as a timely and welcome reform that will make quality stays more accessible to a wider base of Indian travellers and strengthen the country's positioning as a high-potential tourism hub.
"By reducing the tax burden on mid-scale and upper mid-scale hotels, the government has unlocked new opportunities for stronger domestic travel, weekend leisure breaks, and business mobility -- factors that are critical to the hospitality sector's growth. This move reflects a deep understanding of industry dynamics and traveller aspirations, and we are confident it will accelerate momentum across the hospitality landscape while reinforcing India's ambition of becoming one of the world&rsquo;s leading travel destinations," he stated.
Echoing similar sentiments, President of Federation of Hotels and Restaurants Association of India K Syama Raju said the reduction will make Indian hotels more affordable and attractive to both domestic and international travellers.
"This reform will directly boost tourism demand, increase occupancy and encourage more spending across the hospitality value chain. As a sector that already contributes over 5 per cent to India's GDP and is among the largest job creators, this step will further strengthen our role in driving economic growth, generate employment for youth and women, and enhancing India's global competitiveness," he added.
Ajay K Bakaya, Chairman, Sarovar Hotels &amp; Director, Louvre Hotels India, said the reform represents a step in the right direction, simplifying structures and boosting consumer sentiment.
"We hope future measures will build on this momentum to enable holistic growth of the sector, ensuring that hospitality continues to contribute strongly to India's GDP, employment generation and global competitiveness as a tourism destination," he added.
Ankit Pathak, Chief Finance Officer, Ebix Travels, said by bringing hotel tariffs of up to Rs 7,500 under a 5 per cent GST slab, the Council has created a strong incentive for travellers to explore more destinations, especially during the upcoming festive and wedding season when demand peaks.
At the same time, retaining a lower 5 per cent GST on economy air tickets ensures affordability for mass travellers, which is vital for sustaining the momentum in domestic tourism.&nbsp;

Congress criticised the GST Council’s new reforms, calling them ‘GST 1.5’ and said key state demands remain unmet, while the government reduced slabs to 5% and 18% and exempted insurance premiums.

Congress terms GST overhaul 'GST 1.5'; says wait for 'true GST 2.0' continues

Congress criticised the GST Council&rsquo;s new reforms, calling them &lsquo;GST 1.5&rsquo; and said key state demands remain unmet, while the government reduced slabs to 5% and 18% and exempted insurance premiums.

With the GST Council approving a complete overhaul of the Goods and Services Tax (GST) regime, the Congress on Thursday termed it a "GST 1.5" and said the wait for a "true GST 2.0" continues.
The opposition party also demanded that all states should be given compensation for a period of five years, considering 2024-25 as the base year, citing that the reduction in rates would have an adverse effect on their revenue.
Congress president Mallikarjun Kharge said that for almost a decade, the party has been demanding simplification of GST.
"The Modi government changed 'One Nation, One Tax' to 'One Nation, 9 Taxes'. It included tax slabs of 0%, 5%, 12%, 18%, 28% and special rates of 0.25%, 1.5%, 3% and 6%," Kharge said.
"The Congress party had demanded GST 2.0 with a simple and rational tax system in its 2019 and 2024 manifestos. We had also demanded simplification of the complex compliances of GST, which had badly affected MSMEs and small businesses," he said.
On February 28, 2005, the Congress-UPA government formally announced GST in the Lok Sabha, he said.
In 2011, when the then Finance Minister Pranab Mukherjee brought the GST Bill, the BJP opposed it, Kharge said.
He said that when Prime Minister Narendra Modi was the chief minister of Gujarat, he had strongly opposed GST.
"Today, this same BJP government celebrates record GST collections, as if it has done a great job by collecting tax from the common people. For the first time in the history of the country, farmers have been taxed. This Modi government imposed GST on at least 36 items of the agricultural sector," Kharge said.
The Modi government imposed GST on everyday things like milk-curd, flour-grains, even children's pencils-books, oxygen, insurance and hospital expenses, he said.
That is why we named this GST of the BJP as "Gabbar Singh Tax", Kharge sakd.
"Two-thirds of the total GST i.e. 64% comes from the pockets of the poor and the middle class, but only 3% GST is collected from billionaires, while the rate of Corporate Tax has been reduced from 30% to 22%," he said.
In the last 5 years, Income Tax collection increased by 240% and GST collection increased by 177%, he claimed.
"It is a good thing that even after 8 years of delay, Modi government woke up from its deep slumber on GST and talked about Rate Rationalisation, " he said.
All states should be given compensation for a period of five years, considering 2024-25 as the base year, because the reduction in rates is sure to have an adverse effect on their revenue, he said.
The complex compliances of GST will also have to be eliminated, only then will MSMEs and small industries be truly benefited, the Congress chief said.
Congress general secretary in-charge communications Jairam Ramesh said that a key demand of the states made in the true spirit of cooperative federalism, namely, the extension of compensation for another five years to fully protect their revenues, remains unaddressed.
In fact, that demand assumes even greater importance now, he said.
The Indian National Congress has for long been advocating for a GST 2.0 that reduces the number of rates, cuts the rates on a large number of items of mass consumption, minimises evasion, mis-classification, and disputes, does away with inverted duty structure, lower tax on output as compared to inputs, eases the compliance burden on MSMEs, and expands GST coverage, Ramesh said on X.
He noted that Union Finance Minister Nirmala Sitharaman has made major announcements on Wednesday evening after the meeting of the GST Council, which is a constitutional body.
"However, even before the GST Council meeting, the Prime Minister had already proclaimed the substance of its decisions in his Independence Day speech of August 15th, 2025. Is the GST Council to be reduced to a formality?" Ramesh said.
"Faced with a lack of buoyancy in private consumption, subdued rates of private investment, and endless classification disputes, the Union Finance Minister has finally recognised that GST 1.0 had reached a dead end. In fact, the very design of GST 1.0 was flawed and this had been pointed out by the INC way back in July 2017 itself, when the PM had made one of his typical U turns and decided to introduce GST," he said.
It was meant to be a Good and Simple Tax. It turned out to be a Growth Supressing Tax, Ramesh said.
Last evening's announcements have certainly made headlines since the prime minister had already laid down the pre-Diwali deadlines, he said.
Presumably the benefits of rate cuts will be passed on to consumers, he added.
"However, the wait for a true GST 2.0 continues. Whether this new GST 1.5, if it can be called that, stimulates private investment - especially in manufacturing - remains to be seen. Whether this will ease the burden on MSMEs, time alone will tell," Ramesh said.
Common use items from roti/paratha to hair oil, ice creams and TVs will cost less, while tax incidence on personal health and life insurance will be brought down to nil after the all-powerful GST Council on Wednesday approved a complete overhaul of the tangled GST regime.
The GST Council approved limiting slabs to 5 per cent and 18 per cent, effective from September 22, the first day of Navaratri.
Senior Congress leader and former finance minister P Chidambaram described the overhaul as a "U-turn" and said one is left with the thought that these steps are eight years too late.
In a statement, Chidambaram said, "GST rationalisation and reduction of the rates are welcome, but one is left with the thought that these steps are eight years too late." Congress, many economists and the middle and poorer sections of the people have, for years, pointed out that the design of the GST and the initial rates were wrong, but the government turned a deaf ear, Chidambaram said.
"I am happy that the government has realised that the path on which they had walked for 8 years was wrong, and done a U-turn," he said.
It should have always been a 'Good and Simple Tax', he said.
The middle and poor classes will heave a sigh of relief, Chidambaram said.
"The government and, in particular, the FM (Nirmala Sitharaman) had defended the flawed design and the complicated multiple rates so far. It is heartening to see the FM and other government leaders applauding the changes made yesterday!" the Congress MP said in his statement on Thursday.
In a post on Wednesday night, Chidambaram said, "The GST rationalisation and the reduction in rates on a range of goods and services are WELCOME but 8 years TOO LATE." The current design of GST and the rates prevailing until today ought not to have been introduced in the first place, he said.
"We have been crying hoarse for the last 8 years against the design and rates of GST, but our pleas fell on deaf years. It will be interesting to speculate on what drove the government to make the changes: Sluggish growth? Rising household debt? Falling household savings? Elections in Bihar? Mr Trump and his tariffs? All of the above?" he said.
Almost all personal-use items and aspirational goods for the middle class, like AC, washing machines, will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.
Premium paid for individual life insurance and health insurance (including family floater), policies too have been exempted from GST.
Earlier, such policies were subject to 18 per cent GST.

Soft drinks like Coca-Cola and Pepsi will attract 40% GST, up from 28%, while fruit pulp, juice-based, and plant-based beverages get cheaper with reduced GST rates.

Carbonated soft drinks, non-alcoholic beverages to become costlier with GST rate hiked to 40 pc

Soft drinks like Coca-Cola and Pepsi will attract 40% GST, up from 28%, while fruit pulp, juice-based, and plant-based beverages get cheaper with reduced GST rates.

Popular soft drinks, such as Coca-Cola and Pepsi, along with other non-alcoholic beverages, will become costlier, with the GST Council on Wednesday approving a hike in tax rate on carbonated beverages to 40 per cent from 28 per cent at present.
As part of the reforms of the Goods and Services Tax (GST), the council increased the rate on carbonated beverages of fruit drink or carbonated beverages with fruit juice to 40 per cent from 28 per cent.
The council also hiked the GST rate on caffeinated beverages to 40 per cent from 28 per cent.
Other non-alcoholic beverages will also become costlier, as the GST rate on these items has been increased to 40 per cent from 18 per cent.
The GST council has also raised the rate on all goods (including aerated waters), containing added sugar or other sweetening matter or flavoured to 40 per cent from 28 per cent.
On the other hand, the rate on fruit pulp or fruit juice-based drinks (other than carbonated beverages of fruit drink or carbonated beverages with fruit juice) has been cut to 5 per cent from 12 per cent.
Similarly, plant-based milk drinks, ready for direct consumption as beverages, will become cheaper with the GST rate being reduced to 5 per cent from 18 per cent earlier, while that of soya milk drinks has also been cut to 5 per cent from 12 per cent.&nbsp;

GST Council slashed tax on small cars and motorcycles under 350cc from 28% to 18%, kept EVs at 5%, and reduced auto components to 18%, giving a big push to India’s automobile sector.

Small cars, bikes up to 350 cc to get cheaper as GST reforms kick in

GST Council slashed tax on small cars and motorcycles under 350cc from 28% to 18%, kept EVs at 5%, and reduced auto components to 18%, giving a big push to India&rsquo;s automobile sector.

Small cars and entry-level bikes are set to get cheaper as the GST Council on Wednesday approved a complete overhaul of the tangled Goods and Services Tax (GST) regime.
The GST Council approved limiting slabs to 5 per cent and 18 per cent effective from September 22, the first day of Navaratri.
Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length would move to the 18 per cent rate from the current 28 per cent.
Motorcycles up to 350 cc would be taxed at a lower GST of 18 per cent against 28 per cent currently.
All automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc and racing cars will be charged with a 40 per cent levy.
Small hybrid cars will also benefit, while EVs will continue to be charged at 5 per cent.
"Government listened to the automotive industry's long-standing wish list of rationalising GST rates," Mercedes-Benz India MD and CEO Santosh Iyer said in a statement.
This GST revision is the step in right direction, is progressive and will induce the much-needed impetus by boosting consumption and bring momentum to the automotive industry which essentially remains the pulse of the Indian economy, he added.
"We are thankful to the Government for keeping the GST rate for BEVs unchanged, ensuring faster transition to a decarbonised future, while reducing oil imports," Iyer said.
Presently, automobiles are taxed at 28 per cent, which is the highest GST slab.
A compensation cess, ranging from 1 to 22 per cent, is levied on top of this rate, depending on the type of vehicle.
The total tax incidence on cars, depending on engine, capacity and length, ranges from 29 per cent for small petrol cars to 50 per cent for SUVs.
Besides, GST on auto components has been reduced to 18 per cent from the current 28 per cent.
"ACMA welcomes the government's decision to bring all auto components under a uniform 18 per cent GST slab -- a long-standing recommendation of the industry," Automotive Component Manufacturers Association of India (ACMA) DG Vinnie Mehta said.
This landmark reform will help curb the grey market, ease compliance, support MSMEs, and enhance the global competitiveness and resilience of India's automotive component industry, he added.
&ldquo;The move makes tractors and farm machinery more affordable for farmers, reduces costs for commercial vehicles and improves accessibility for personal mobility through rationalisation of rates across all SUVs. Together, these measures are expected to stimulate demand and drive inclusive growth across the entire ecosystem,&rdquo; Rajesh Jejurikar, ED &amp; CEO -Auto and Farm Sector, M&amp;M, said.
The continuation of the 5% GST rate on EVs is a critical enabler of India&rsquo;s clean mobility vision. This measure will further accelerate the adoption of electric vehicles and reinforce India&rsquo;s leadership in sustainable, green transportation, Jejurikar said.
The GST panel approved simplifying the GST from the current four slabs - 5, 12, 18 and 28 per cent, to a two-rate structure - 5 and 18 per cent.
A special 40 per cent slab is also proposed for a select few items.&nbsp;

GST Council slashes slabs to 5% and 18%, exempts life and health insurance, and lowers rates on daily essentials, electronics, and vehicles effective September 22.

GST Council simplifies tax slabs, exempts insurance, cuts rates on essentials

GST Council slashes slabs to 5% and 18%, exempts life and health insurance, and lowers rates on daily essentials, electronics, and vehicles effective September 22.

Common use items from roti/paratha to hair oil, ice creams and TVs will cost less, while tax incidence on personal health and life insurance will be brought down to nil after the all-powerful GST Council on Wednesday approved a complete overhaul of the tangled Goods and Services Tax (GST) regime.
The GST Council approved limiting slabs to 5 per cent and 18 per cent, effective from September 22, the first day of Navaratri.
Almost all personal-use items and aspirational goods for the middle class, like AC, washing machines, will see rate cuts as the government looks to boost domestic spending and cushion the economic blow of the US tariffs.
Premium paid for individual life insurance and health insurance (including family floater), policies too have been exempted from GST.
Earlier, such policies were subject to 18 per cent GST.
Briefing reporters after a marathon day-long GST Council meeting, Union Finance Minister Nirmala Sitharaman said all decisions were taken unanimously, with no disagreement with any state.
The panel approved simplifying the GST from the current four slabs - 5, 12, 18 and 28 per cent, to a two-rate structure - 5 and 18 per cent. A special 40 per cent slab is also proposed for a select few items such as high-end cars, tobacco and cigarettes.
The new rates for all products, except pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi, will be effective September 22, she said.
Such tobacco and tobacco-related products will continue to be subject to a 28 per cent GST rate plus a compensation Cess till the time the loans taken to compensate states for loss in revenue during COVID years are repaid. The loans are expected to be repaid by the end of the calendar year.
Once that ends, tobacco and tobacco-related products will be subject to a 40 per cent GST rate.
Sitharaman said the reforms have been carried out with a focus on the common man, and in most cases, tax rates have come down drastically.
"I think it will have a very positive impact on the GDP," Sitharaman said when asked about the impact of rate rationalisation on GDP growth.
Labour-intensive industries have been given good support, and agriculture and health industries would also benefit from the rate rationalisation, she said.
"Key drivers of the economy have been given prominence," Sitharaman said, adding all state finance ministers said they are all together for the common man.
While daily use food items will continue to attract a nil tax rate, the tax rate has been slashed to nil from 5 per cent on ultra-high temperature milk, chena or paneer, pizza bread, khakra, plain chapati or roti.
Nil will also be the tax on paratha (currently charged at 18 per cent).
Common use food and beverages ranging from butter and ghee to dry nuts, condensed milk, cheese, figs, dates, avocados, citrus fruits, sausages and meat, sugar boiled confectionery, jam and fruit jellies, tender coconut water, namkeen, drinking water packed in 20-litre bottles, fruit pulp or fruit juice, beverages containing milk, ice cream, pastry and biscuits, corn flakes and cereals, and sugar confectionery are likely to see a cut in tax rate to 5 per cent from current 12 per cent or 18 per cent.
Erasers, maps, pencil sharpeners and exercise books will be charged at nil from 5 per cent.
Consumer goods such as tooth powder, feeding bottles, tableware, kitchenware, umbrellas, utensils, bicycles, bamboo furniture and combs will see a rate cut from 12 per cent to 5 per cent. The same on shampoo, talcum powder, toothpaste, toothbrushes, face powder, soap and hair oil has been cut down from 18 per cent to 5 per cent.
She said all individual life and health insurance policies will now attract nil tax in a bid to boost coverage.
Cement will cost less with the tax rate coming down from 28 per cent to 18 per cent. Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length would move to 18 per cent rate from the current 28 per cent.
Motorcycles up to 350 cc, consumer electronics like ACs, dishwashers, and TVs too would be taxed at a lower GST of 18 per cent as against 28 per cent currently.
Petrol engine automobiles above 1,200 cc and diesel engine above Rs 1500 cc and longer than 4,000 mm, as well as motorcycles above 350 cc, yachts and aircraft for personal use, and racing cars will be charged with a 40 per cent levy. Aerated drinks containing added sugar will be taxed at 40 per cent.
Currently, they are at 28 per cent slab, plus a compensation cess.
EVs will continue to be charged at 5 per cent.
The financial implication of the rate rationalisation would be Rs 48,000 crore and this would be "fiscally sustainable for Centre and state", Revenue Secretary Arvind Shrivastava told reporters here.
He said that revenue implication is a dynamic number which will keep changing depending on changes in consumption. "Rate rationalisation results in buoyancy. We also expect compliance to improve".
Earlier, opposition-ruled states had voiced concern about the revenue implications of the rationalisation and sought a compensation mechanism. However, in the Council meeting, the states came together and decided to reduce tax rates for the common man.
The move to simplify the tax regime - first announced by Prime Minister Narendra Modi in his Independence Day speech - comes as India's exports to the US face a 50 per cent tariff - the highest in the world.&nbsp;

The Centre may push for a 5% GST on electric vehicles as part of a major GST overhaul, reducing slabs to 5% and 18%. Opposition states demand compensation for revenue loss.

GST Council meets today; tax cuts on daily use items in offing

The Centre may push for a 5% GST on electric vehicles as part of a major GST overhaul, reducing slabs to 5% and 18%. Opposition states demand compensation for revenue loss.

The Centre is likely to push for a 5 per cent tax on EVs when its ambitious overhaul of the Goods and Services Tax (GST) to lower tax rates on daily use items ranging from butter to electronics is considered by the all powerful GST Council in a two-day meeting starting Wednesday.
The Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising ministers from all states, will discuss the Centre's 'next-gen' GST reform proposal of having just two tax rates of 5 and 18 per cent by moving products from the current 12 and 28 per cent slab to lower rates. A special 40 per cent rate has been proposed to be levied on select few items.
While the pruning of the tax slabs and the resultant expected fall in prices have been welcomed, opposition ruled states are seeking compensation for any loss of the revenue that may occur because of the rejig.
A 4-tier GST structure of 5, 12, 18 and 28 per cent was implemented from July 1, 2017, when the Centre and states agreed to subsume most of their taxes like excise duty and VAT into one uniform tax. A compensation cess in the range of 1 to 290 per cent is levied on luxury and demerit goods to create a revenue pool for compensating states for the loss of revenue occurring from the exercise.
However, the compensation mechanism was for initial 5 years ending June 2022.
Prime Minister Narendra Modi had in his Independence Day speech on August 15 unveiled the plan for GST reforms. Shortly thereafter the central government shared a blue print of the planned reform with a Group of Ministers (GoM) from different states for initial vetting.
The GoM has consented to Centre's proposal of doing away with the 12 and 28 per cent slabs, and reducing tax rates to benefit common man. Its recommendations are to be considered by the Council on September 3 and 4.
While broadly agreeing with the slab changes, the GoM has favoured charging electric vehicles priced up to Rs 40 lakh with an 18 per cent GST, sources aware of the matter said. The Centre, however, is keen to push EV adoption and favours a 5 per cent rate and the same stance will be pushed in the Council meeting, they said.
Most of the common use food items like ghee, nuts, drinking water (20 litre), non-aerated drinks, namkeen; certain footwear and apparels; medicines and medical devices are likely to move from 12 per cent to 5 per cent tax slab. Common use items ranging from pencils, bicycles, umbrellas to hair pins may also move to 5 per cent slab.
Prices of electronic items like certain category of TV, washing machine and refrigerator are likely fall because of being taxed at a lower rate of 18 per cent, as against 28 per cent currently.
Goods like automobiles that are currently charged at the highest slab of 28 per cent, plus a compensation cess, may see a differential rates with entry level cars being charged 18 per cent rate, while SUVs and luxury ones being put in the special 40 per cent rate.
The special 40 per cent rate will also be for other demerit goods like tobacco, pan masala and cigarretes. There could also be an additional tax on top of this rate for this category.
Opposition states, like West Bengal, have demanded that any levy on top of the 40 per cent rate should exclusively be for sharing with states to make up for their revenue losses.
Eight opposition-ruled states -- Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal &mdash; have also demanded that all states be compensated for the revenue loss they incur post the implementation of the GST rejig.
These states have argued that rejig in rates and abolition of slabs will lead to lower revenues. The Centre, however, is of the opinion that lower prices will boost consumption and mostly make up for any loss of revenue in the long run.
These states are likely to meet ahead of the GST Council meeting on September 3 to formalise their strategy on the issue.
Sources said the Centre was equally concerned about revenue implications of the GST rejig and its GST reform proposal would ensure least revenue disruption, while easing compliance burden for businesses.
As per the Centre's proposal, 99 per cent of the items in the current 12 per cent bracket will be shifted to the proposed 5 per cent slab. Besides, 90 per cent of the items in the 28 per cent bracket would be shifted to 18 per cent.

Currently, 18 per cent GST is levied on health and life insurance premiums

GST On Insurance: Decision To Be Taken At GST Council's November Meet Says FM

Currently, 18 per cent GST is levied on health and life insurance premiums

The GST Council has decided to set up a new GoMs (Group of Ministers) on medical and health insurance. It will be the rate rationalisation GoM headed by the Deputy Chief Minister of Bihar but with newer members added for this limited purpose.
Speaking to media after the GST Council's meeting, Finance Minister Nirmala Sitharaman said that the new GoM has been asked to look into the insurance GST matter and come up with a report by the end of October 2024.
The GST council which will meet in November will take the final call based on this report which will come from the GoM.
In August 2024, Union Minister Nitin Gadkari had written to the Finance Minister, urging her to consider withdrawing the 18 percent GST on life and medical insurance.
Gadkari wrote to Nirmala Sitharaman after LIC employees in Nagpur apprised him of the challenges the insurance sector was facing. In his letter, Gadkari argued that GST on insurance taxes life's uncertainties and hinders sector growth, and therefore it should be removed.
Following Nitin Gadkari's letter, opposition parties also demanded the withdrawal of GST on insurance products. On August 6, 2024, INDIA bloc members led by Congress leader Rahul Gandhi protested outside Makar Dwar in Parliament against Central Govt, demanding the rollback of GST on health and life insurance.
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The 52nd GST Council meeting's decisions included reducing molasses GST from 28% to 5% and imposing 18% GST on personal guarantees for bank loans

GST council meeting highlights: Key decisions include GST cut on Millet flour and Molasses

The 52nd GST Council meeting's decisions included reducing molasses GST from 28% to 5% and imposing 18% GST on personal guarantees for bank loans

The 52nd Goods and Services Tax Council meeting was held today at Sushma Swaraj Bhawan in New Delhi, chaired by Union Finance Minister Nirmala Sitharaman. The meeting was attended by Union Minister of State for Finance, besides Finance Ministers of States and UTs (with Legislature) and Senior officials from Union Government and States.
The council discussed several key issues, including the exemption of GST on powdered millets, extending the concessional rate of 18% GST on vehicles purchased by visually impaired persons, and taxability on corporate guarantee and bank guarantee given by the directors and promoters of the companies. The council also reviewed the implementation of the 28% levy on online gaming, horse racing, and casinos.
The council decided to reduce GST on molasses from 28% to 5%. It also agreed to levy an 18% GST on personal guarantees given by promoters/directors against loans given by banks. The council is expected to release a circular providing clarification that data center services are to be considered as exports, exempt from GST, particularly in the case of overseas customers.
FM Sitharaman announced that no tax rate would be imposed on millet flour containing 70% composition. She also stated that branded products would be levied with a 5% tax rate. The FM also approved the formation of GST Tribunal. Apart from this, IGST will not be imposed on imported cancer drugs.
The council&rsquo;s decisions will have a significant impact on businesses and consumers alike. The reduction in GST on molasses will benefit sugar mills and distilleries. The exemption of GST on powdered millets will provide relief to farmers and consumers. The reduction in tax rates for branded products will make them more affordable for consumers. The decision to levy an 18% GST on personal guarantees given by promoters/directors against loans given by banks will have an impact on businesses&rsquo; borrowing costs.
Overall, the decisions taken at the 52nd GST Council meeting are expected to have a positive impact on businesses and consumers alike. &nbsp;

The monthly GST revenue has remained at more than Rs 1.4 lakh crore for 12 months in a row, including February

GST collection rises 12% in February

The monthly GST revenue has remained at more than Rs 1.4 lakh crore for 12 months in a row, including February

Goods and Services Tax (GST) collections rose 12 per cent to more than Rs 1.49 lakh crore in February as domestic economic activities and consumer spending on high-end goods gained momentum.
However, the collections are lower than January mop up of Rs 1.58 lakh crore, which was also the second highest monthly revenue figure since the rollout of GST on July 1, 2017.
"Rs 1,49,577 crore gross GST revenue collected in February 2023; 12 per cent higher than GST revenue in same month last year," the finance ministry said in a statement on Wednesday.
Generally, February being a 28-day month, witnesses a relatively lower collection of GST revenue, the ministry said.
During the month, revenues from domestic transaction (including import of services) were 15 per cent higher while revenues from import of goods was 6 per cent higher compared to the same month last year.

GST Council meeting will be chaired by Union finance minister Nirmala Sitharaman and comprising her state counterparts on Feb 18 

GST Council meeting on Feb 18, here's a list of key expectations 

GST Council meeting will be chaired by Union finance minister Nirmala Sitharaman and attended by her state counterparts on Feb 18&nbsp;

The GST Council in its meeting on Saturday is likely to discuss setting up appellate tribunals and mechanism to curb tax evasion in pan masala and gutkha business, sources said.
The report of panel of ministers on Goods and Services Tax (GST) on online gaming and casinos may not come up for deliberation at the February 18 meeting of the GST Council, chaired by Union finance minister Nirmala Sitharaman and comprising her state counterparts.
The items, which could not be discussed by the Council in its last meeting on December 17, 2022, would top the agenda of the 49th GST Council meeting on February 18, the sources said.
The report of the Group of Ministers (GoM), headed by Odisha finance minister Niranjan Pujari, on checking tax evasion by pan masala and gutkha industry would be taken up for discussion.
The report of the GoM on Goods and Services Tax Appellate Tribunals (GSTATs) was set up in July last year under the chairmanship of Haryana deputy chief minister Dushyant Chautala.
The GoM has suggested that the tribunals should consist of two judicial members, and one technical member each from the Centre and states, besides a retired Supreme Court judge as president.
However, the Meghalaya chief minister Conrad Sangma chaired panel report on online gaming is unlikely to come up for discussion. The report has already been submitted to the Union finance minister and it has to be circulated to states before it could come up before the Council for deliberation.
The GoM, in its last meeting in November, had agreed on a 28 per cent GST on these segments. Currently, online gaming attracts 18 per cent GST. The tax is levied on gross gaming revenue, which is the fees charged by online gaming portals.

In a game changing judgement the Supreme Court has ruled that the Central government and States have simultaneous powers to legislate on Goods and Service Tax (GST).A bench led by Justice DY Chandrachud held that the Parliament intended that the recommendations of the GST Council will have persuasive value but are not binding on the states.The court ruled that both Parliament & State Legislatures can legislate on GST.
In a twist for compensation share the bench stated that recommendations of GST council are product of collaborative discussion. "It is not imperative that one of the federal units must always possess a higher share."  Justice Chandrachud read out. 

Supreme Court says GST Council recommendations are not binding on States

GST Council Recommendations Not Binding On Centre &amp; States Both Parliament &amp; State Legislatures Can Legislate On GST Justice DY Chandrachud: "Recommendations of GST council are product of collaborative discussion. It is not imperative that one of the federal units must always possess a higher share

States can legislate on GST, SC ruling changes the dynamic

Central government and States have simultaneous powers to legislate on GST: Supreme Court

In a game changing judgement the Supreme Court has ruled that the Central government and States have simultaneous powers to legislate on Goods and Service Tax (GST).
A bench led by Justice DY Chandrachud held that the Parliament intended that the recommendations of the GST Council will have persuasive value but are not binding on the states.
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The court ruled that both&nbsp;Parliament &amp; State Legislatures can legislate on GST.
In a twist for compensation share the bench stated that recommendations of GST council are product of collaborative discussion. "It is not imperative that one of the federal units must always possess a higher share."&nbsp; Justice Chandrachud&nbsp;read out.&nbsp;
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