GST Council Kicks Off 56th Meeting with Focus on Next-Gen Tax Reforms

New Delhi, September 3, 2025: The 56th Goods and Services Tax (GST) Council meeting, presided over by Finance Minister Nirmala Sitharaman, initiated deliberations today on far-reaching “next-gen GST” changes to rationalise rates, simplify compliance for small units, and deal with duty inversion in key sectors like textiles.

Major GST Rate Overhaul Under Discussion Could Shift 90% of High-End Products to 18%

The Council is considering a bold bid to compress the current tax structure into only two slabs: 5% and 18% while scrapping the existing 12% and 28% slabs. Moreover, an extra 40% rate has been proposed on specific items like ultra-luxury products and tobacco.

The major highlights of the plan are:

• 99% of products in the 12% slab  such as butter, fruit juices, and dry fruits are to be transferred to 5%.
• 90% of products in the 28% slab  such as air-conditioners, refrigerators, televisions, washing machines, and cement are to be moved down to 18%.

The Centre’s blueprint has eight priority sectors to gain the most: textiles, fertiliser, renewable energy, auto, handicrafts, agriculture, health, and insurance.

Political Divides Surface as States Project ₹2,000 Cr Loss Amid GST Changes

While the Centre and supporting states, such as Andhra Pradesh, have backed the reforms, opposition-ruled states have expressed fears of a loss of revenues. Andhra Pradesh Finance Minister Payyavula Keshav stated, “As an alliance partner, we are in favor of the Centre’s suggestion of GST rate rationalisation. It is in favour of the common man.”

Conversely, Jharkhand, Kerala, Karnataka, and West Bengal held a collective meeting this morning to press for revenue protection assurances. Jharkhand’s Finance Minister Radha Krishna Kishore alerted that his state alone would incur a ₹2,000 crore deficiency, and he urged the Centre to reimburse losses under the new framework.

Revenue Dynamics Show 65% of GST from 18% Slab, Driving Proposed Structural Reforms

Currently, the 18% slab contributes 65% of total GST revenue, while 5% contributes 7%, the 28% slab adds 11%, and the 12% slab accounts for only 5%.

The Centre has based its reform proposal on three pillars:

• Structural reforms to achieve long-term stability and predictability of rates.
• Rate rationalisation to reduce slabs and eliminate duty inversion.
• Ease of living through initiatives such as pre-filled GST returns, machine learning-based auto-refund processing, and simplified startup and MSME registration.

Broader Reform Context Set to Reshape India’s Indirect Tax System Post Independence Day Blueprint

Prime Minister Narendra Modi had set out the vision for the GST rationalisation in his Independence Day speech, following which the government had circulated the blueprint of the reforms to a Group of Ministers for vetting. Finance Minister Sitharaman reaffirmed yesterday that the reforms would introduce a more transparent tax regime and drastically reduce compliance costs, facilitating the easier ability of small enterprises to prosper. The deliberations of the Council will go on for the next two days, with a choice likely to define India’s indirect tax architecture for years to come.

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