Finance Minister Nirmala Sitharaman on Wednesday held a meeting with the Group of Ministers (GoM) from states to discuss the Centre’s proposed GST reforms. She outlined plans to rationalise tax slabs, reduce rates on insurance, and ease compliance burden on businesses.
The two-day consultation will focus on the Centre’s “next-generation” GST reforms. The proposal includes shifting to a three-slab structure with 5%, 18%, and a special 40% rate for around 5–7 items, including demerit goods. Currently, GST is levied at 5%, 12%, 18% and 28% with additional cess on luxury and sin goods.
According to sources, the Finance Minister spoke for about 20 minutes, emphasising the need for structural reforms and detailed the Centre’s proposals. The GoM on compensation cess was formed to decide its future beyond the loan repayment period, while another GoM is reviewing health and life insurance premiums for possible tax reduction.
The GoM on rate rationalisation has been tasked with recommending changes in slabs, resolving inverted duty issues, and simplifying the structure. It will meet again on August 21 before finalising suggestions. Once cleared by the GoMs, the proposals will be presented at the upcoming GST Council meeting, where both the Centre and states will deliberate.
An SBI Research report estimated that if the reforms are implemented, the government may face an annual revenue loss of about ₹85,000 crore, with a projected ₹45,000 crore loss in the current fiscal if rates take effect from October 1. It also noted that the effective weighted average GST rate has already dropped from 14.4% at the rollout to 11.6% by 2019, and could fall further to 9.5% under the proposed changes.
