Amit Shah To Lead Talks On GST Overhaul Amid Revenue Loss Concerns

To inject urgency into the long-pending overhaul of the Goods and Services Tax (GST) regime, Union Home Minister Amit Shah will lead talks with all stakeholders, including state governments and Central ministries.

The effort aims to build consensus and resolve politically sensitive issues, especially around rate rationalisation, which has stalled for years.

One of the key proposals under discussion is the removal of the 12 per cent GST slab, with items to be shifted either to the 5 per cent or 18 per cent slabs.

While this move would simplify the structure, it may lead to revenue losses of ₹70,000–80,000 crore for the Centre and states combined, sources said.

States reluctant to accept rate tweak proposal

Sources said Amit Shah held discussions last week with officials from the Finance Ministry. The Home Minister’s involvement signals the importance of the decision and the need for political coordination.

“No state, whether BJP-ruled or in Opposition, will accept the proposal easily without talks,” a source said.

Shah’s role becomes crucial, as the overhaul involves politically sensitive decisions that could face resistance in the GST Council.

While he has chaired key meetings in the past—such as on price rise and disinvestment—his presence now aims to convince states ahead of a possible vote in the Council.

The 12 per cent slab currently includes a wide range of goods such as packaged food, cotton bags, sewing machines, and medical supplies like oxygen and diagnostic kits. These items will need careful reclassification if the slab is abolished.

GST Council efforts stalled despite repeated reviews

The GST regime, rolled out in July 2017, has long faced criticism for its multiple rate structure: 0%, 5%, 12%, 18%, 28%, plus additional cesses.

Efforts to rationalise these rates began formally during the 45th GST Council meeting in 2021, with corrections in inverted duty structures on footwear and textiles.

The ministerial panel on rate rationalisation met again earlier this year and proposed retaining the 12 per cent slab, citing complications in shifting items.

However, the approach contradicted the broader aim of reducing the number of slabs. The panel chose to revisit the matter in future meetings.

As per 2023–24 data shared in Parliament, the 12 per cent slab contributes just 5–6 per cent of GST revenue, while the 18 per cent slab accounts for 70–75 per cent. The 5 per cent slab makes up 6–8 per cent, and the 28 per cent slab contributes 13–15 per cent.

In its 55th meeting held in Jaisalmer in December 2024, the Council discussed lowering rates on several items, including insurance premiums, but deferred key decisions.

The Group of Ministers asked for more time to finalise rate changes on 148 items, which will likely return to the agenda in the upcoming meeting.

Also Read: Income Tax Department Cracks Down On Bogus Claims Of Deductions And Exemptions