8 Opposition-ruled States Seek Revenue Safeguards as GST Council Plans Tax Slab Overhaul

Moneylife Digital Team 03 September 2025

Economy & Nation

Finance ministers from eight Opposition-ruled states met on Wednesday ahead of the 56th goods and services tax (GST) council meeting, seeking compensation for potential revenue losses following the proposed GST rate revisions.

The states—Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, and West Bengal—had earlier deliberated on protecting their revenues, considering the Union government’s plan to remove the 12% and 28% GST slabs.

Jharkhand's finance minister Radha Krishna Kishore estimated that his state alone could face a revenue shortfall of around Rs2,000 crore, if the reforms are implemented without compensation.

The two-day GST council meeting, chaired by Union minister of finance Nirmala Sitharaman, commenced in New Delhi on Wednesday. The council is set to discuss India’s next-generation GST reforms, which aim to simplify compliance, rationalise tax rates, and reduce the burden on households and small businesses. Representatives from all states and Union Territories (UTs) are attending the meeting.

According to the ministry of finance, the proposed changes include reducing products from the current 12% and 28% slabs to 5% and 18%, and applying a special 40% rate on select items. Key proposals also include expanding the nil GST category to cover commonly consumed food items such as loose paneer, khakhra, pizza bread, chapati and roti, as well as ready-to-eat foods like paratha and parotta, which are currently taxed at 18%.

Items such as butter, condensed milk, jams, nuts, namkeens, mushrooms, and dates may see their GST cut from 12% to 5%. The Union government has also proposed reducing GST on confectionery, packaged snacks, breakfast items and desserts, including cocoa chocolates, pastries, ice-cream and cereal flakes, to 5%, primarily targeting urban consumers and younger demographics.

The automotive sector may benefit as entry-level passenger vehicles and two-wheelers are expected to have their GST reduced to 18%, down from the current 28% plus a variable compensation cess. The education sector is also set to gain from proposed GST exemptions on maps, globes, pencil sharpeners, exercise books, graph books and lab notebooks, which could bring relief to students and parents ahead of the new academic year.

Finance minister Sitharaman highlighted that the next-generation GST reforms aim to create an open and transparent economy while easing compliance burdens for businesses, particularly micro, small, and medium enterprises (MSMEs). The revised GST structure, if approved by the council, could be implemented by 22 September 2025.

The GST council meeting comes weeks after prime minister (PM) Narendra Modi, in his Independence Day address, emphasised the benefits of GST and promised the next phase of reforms by Diwali, with a focus on easing tax burdens for the common man, farmers and the middle class.

Comments

User

badhri9984

4 months ago

GST initial implementation without doing any proper ground work is accepted by the ruling clique and also totally various slabs erroneous considering present somersaults. Non application of mind is accepted by government . Thuglak durbar . What is the guarantee producers and traders will pass on the benefits. They will increase the rates considering rupee depreciation against dollar, inflation, alarming rise of cost of inputs and labour charges and the benefits will not reach end consumers. Pro corporate regime not withdrawn input tax credits to generate revenues to compensate State exchequers.