GST Council Likely To Discuss Rate Rationalisation, Future Of Compensation Cess In Upcoming Meeting
Union Finance Minister Nirmala Sitharaman had earlier indicated that GST rates could see further reductions, as the exercise to rationalise tax slabs nears completion
The Goods and Services Tax (GST) Council is expected to take up key structural reforms in its upcoming meeting, with a focus on rate rationalisation and the future of the compensation cess, as part of efforts to simplify India’s indirect tax regime. The meeting, likely to be held soon in New Delhi, comes as states seek greater clarity on their revenue prospects ahead of the next fiscal planning cycle.
According to a report by NDTV Profit citing government sources, one of the central issues on the agenda is the continuation of the compensation cess beyond 2026. The cess, introduced to compensate states for revenue losses following the rollout of GST in July 2017, has become a point of contention as its scheduled expiry approaches.
Further Reduction In GST Rates
Union Finance Minister Nirmala Sitharaman had earlier indicated that GST rates could see further reductions, as the exercise to rationalise tax slabs nears completion. The revenue-neutral rate (RNR), initially estimated at 15.8 per cent, has gradually declined to 11.4 per cent as of 2023, and is expected to drop further.
Sitharaman noted that the restructuring of the GST framework is nearly finished, and a final decision is likely at the Council’s next session. The GST Council, chaired by the Union Finance Minister and comprising finance ministers from all states, is the apex decision-making body for GST policy.
A Group of Ministers (GoM), constituted in September 2021, has been working to streamline GST slabs and rates. Comprising finance ministers from six states, the GoM is tasked with enhancing the efficiency of the tax system by addressing industry concerns, reducing rate distortions, and narrowing the number of tax brackets.
The upcoming meeting gains added significance amid a record GST collection of Rs 2.36 lakh crore in April 2025, a 12.6 per cent rise from Rs 2.10 lakh crore in April 2024, reflecting both strong economic activity and improved tax compliance. The robust figures underscore the momentum behind India's tax reforms and the spirit of cooperative federalism between the centre and states.
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