Opposition-ruled states are demanding revenue protection and consumer safeguards as the 56th GST Council meeting commenced on Wednesday, according to sources. The proposed GST overhaul, aimed at simplifying the tax system into two slabs—5% and 18%—could make daily essentials and electronics cheaper, while imposing higher levies on luxury items.
These states have stressed that companies must not profiteer from lower GST rates and that benefits should be passed directly to consumers. They are also pressing for a clear compensation plan to ensure that states do not face massive revenue shortfalls. Some BJP-ruled states have voiced similar concerns over potential losses due to the revised slabs.
The fiscal stakes are high. When GST was first implemented, the Centre promised to compensate states for revenue losses for five years through a cess on luxury and sin goods—a mechanism that expired in June 2022.
Opposition states now want assurances that any additional levy, particularly from the proposed 40% tax on luxury items, will be directed to state coffers.
Experts note that the revenue impact will differ across regions. Sundeep Gupta, Partner at Baker Tilly ASA India LLP, said, “Consumption-driven states may gain from increased demand, but debt-heavy states like Punjab, Bihar, and West Bengal rely heavily on GST revenue. Without compensation, they could face serious stress.”
Former Finance Secretary Subhash Chandra Garg echoed the warning. “Opposition states have made it clear that substantial compensation is needed. Losses could run up to Rs 2 lakh crore if unaddressed, making this meeting potentially contentious.”
Pratik Jain, Partner at PwC India, said the GST reforms could roll out soon, potentially within days. “Lowering rates will boost consumption, but the Centre will need to manage state finances carefully,” he noted.
As deliberations continue, the GST Council faces the challenge of balancing immediate relief for consumers with long-term fiscal stability for states, making the outcome of this meeting closely watched across the country.
Source: India Today