The Group of Ministers (GoM) on Rate Rationalisation, established by the Goods and Services Tax (GST) Council, has agreed to adopt the Centre’s proposal for a two-rate GST structure and will be recommending it to the GST Council, said GoM chairperson and Bihar Deputy Chief Minister Samrat Choudhary on Thursday.

The decision, which aims to simplify the current four-tier rate structure of 5%, 12%, 18%, and 28% into two slabs of 5% and 18%, will now be placed before the GST Council for final approval. The GST Council, comprising representatives from all states, is expected to convene in early October to discuss the proposal.

Under the new proposal, luxury items and tobacco products are to be taxed at a higher rate of 40%. Choudhary confirmed that the panel had agreed to the Centre’s recommendation.

Union Finance Minister Nirmala Sitharaman expressed optimism that states would support the rate revision during the GST Council meeting. Kerala Finance Minister K.N. Balagopal emphasised that the benefits of rate rationalisation must reach ordinary consumers and warned against any scenario where companies disproportionately benefit.

Concerns over revenue loss and compensation demands

Although the ministerial committee endorsed the proposal in principle, opposition-ruled states demanded safeguards to address potential revenue losses. The six-member panel included representatives from BJP-ruled states and opposition party-ruled states such as Kerala (Left Front), Telangana (Congress), and West Bengal (Trinamool Congress).

Kerala raised concerns over anticipated annual revenue losses estimated at approximately ₹9,000 crore due to the rate restructuring. Opposition states insisted on a robust compensation mechanism to offset such losses.

Telangana further advocated for a precise system to ensure adequate compensation. The two-day ministerial committee meeting concluded on Thursday.

In related developments, the committee reached a consensus on Wednesday to exempt GST on personal health and life insurance premiums, which currently attract an 18% GST. The final decision will be taken at the forthcoming GST Council meeting.