The GST Council, chaired by Union Finance Minister and comprising state counterparts, in its meeting in December last year, did not take up the GoM reports on rate rationalisation and rate reduction in health and life insurance..
New Delhi: The GST Council is likely to meet soon to discuss rate simplification and rationalisation and the future of compensation cess, according to a source.
“There are three or four different aspects relating to making GST simpler. We will take up the issue of compensation cess, rate rationalisation and simplification,” the source said.
With a focus on simplifying the indirect tax regime and addressing anomalies in the existing Goods and Services Tax (GST) rate structure, the GST Council is likely to take up rate rationalisation and the future of compensation cess in its next meeting.
The meeting in New Delhi is anticipated to be convened soon, with states also pushing for clarity on their revenue outlook ahead of the next fiscal planning cycle.
The GST Council, chaired by Union Finance Minister and comprising state counterparts, in its meeting in December last year, did not take up the GoM reports on rate rationalisation and rate reduction in health and life insurance.
The two GoMs, which recommended a reduction in rates and providing exemption to certain categories, are yet to submit their final report to the GST council.
The GoM on Compensation Cess, headed by Minister of State for Finance Pankaj Chaudhary, is looking into the future of compensation cess beyond March 2026.
As of now, the cess is being levied on luxury and sin goods but is being utilised only for paying back loans taken during the COVID to make good the loss to states in GST revenues.
GoM is now studying how to retain the revenue from cess in some other form and how it is to be shared between the Centre and the states.
Union Finance Minister Nirmala Sitharaman in March said that GST rates will be reduced further as the process of rationalising tax slabs is nearing completion.
The revenue neutral rate (RNR), which was 15.8 per cent when GST was introduced in July 2017, has now come down to 11.4 per cent in 2023 and will decrease further.
FM Sitharaman said that the work on simplifying GST slabs is almost finished and the GST Council, which is led by Finance Minister and includes state finance ministers, is expected to take a final decision soon.
The Group of Minister (GoM) was set up in September 2021 to suggest changes in GST rates and slabs. This committee consists of finance ministers from six states and has been working on making the tax system more efficient. The rationalisation process includes reducing the number of tax slabs, streamlining rates, and addressing key concerns raised by different industries.
The Union Minister further emphasised that a final review is underway before presenting the proposal at the next GST Council meeting.
The gross GST collections for April stood at Rs 2.36 lakh crore, marking a 12.6 per cent increase over the gross collection of Rs 2.10 lakh crore in April 2024. The record GST collection in April showcases the resilience of the Indian economy and the effectiveness of cooperative federalism.