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1h ago

Opposition States Press for 5-Year Compensation as Two-Slab GST Plan Heads to Council

A coalition from eight states seeks revenue protection to counter anticipated losses under the proposed 5%–18% regime with a 40% band for sin and luxury goods.

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Eight states call for compensation mechanism to safeguard states’ revenue after GST rate rationalisation

Overview

  • the GST Council is slated to meet on September 3–4 to consider the GoM plan to drop the 12% and 28% slabs, shifting to 5% and 18% plus a ~40% rate for select sin and ultra-luxury items.
  • sectoral fitment reports indicate most 12% items, including medicines and fertilisers, would move to 5%, many 28% goods such as autos and durables to 18%, with premium air tickets at 18% and private aircraft at 40%.
  • eight opposition-ruled states warn of a ₹1.5–2.0 lakh crore annual shortfall and a 15–20% hit to state GST revenues, urging a five-year compensation framework using 2024–25 as the base year.
  • their proposal includes an extra levy on sin and luxury goods with proceeds shared with states and anti-profiteering safeguards to ensure tax cuts reach consumers.
  • analysts are divided, with Nomura projecting a collections gap while Ambit and BMI see potential consumption and growth gains as the compensation cess approaches its 2026 expiry.