Guwahati: As the 56th GST Council meeting got underway on Wednesday, opposition-ruled states actively demanded clear revenue protection measures and consumer safeguards in light of the proposed tax reform.
According to sources, the central government is considering a simplified two-slab GST structure, 5% and 18%, that could make daily essentials and electronics cheaper, while placing higher taxes on luxury items.
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Opposition leaders emphasized that businesses must not profiteer from lower GST rates and insisted that consumers directly receive the benefits of reduced taxation.
They also urged the Centre to lay out a transparent compensation plan, warning that without it, states could suffer significant revenue shortfalls.
Interestingly, even some BJP-ruled states raised similar concerns over potential financial losses stemming from the revised GST structure.
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Centre’s Past Commitments Under Scrutiny
When the Centre introduced GST, it had promised to compensate states for five years through a cess on luxury and sin goods. However, that compensation scheme expired in June 2022, leaving many states, especially those with high debt burdens like Punjab, Bihar, and West Bengal, on shaky fiscal ground.
Now, opposition states are demanding that any additional revenue, particularly from the proposed 40% tax on luxury goods, should go directly to state governments rather than staying with the Centre.
Experts Warn of Fiscal Strain
Tax and policy experts have weighed in on the potential impact of the reforms.
Sundeep Gupta, Partner at Baker Tilly ASA India LLP, pointed out that consumption-driven states may benefit from increased demand, but debt-ridden states could experience severe stress without compensation.
Former Finance Secretary Subhash Chandra Garg warned that losses could reach up to ?2 lakh crore if the Centre fails to address the compensation issue. “Opposition states have made it clear that they won’t back the proposal without substantial support,” Garg said, adding that the meeting could turn contentious.
GST Reform May Roll Out Soon
Despite these concerns, Pratik Jain, Partner at PwC India, suggested that the reforms might roll out within days. He explained that lower GST rates could boost consumption, but added a note of caution: “The Centre must tread carefully to maintain fiscal stability across states.”
Balancing Reform with Stability
As the Council continues deliberations, it faces a tough balancing act, offering tax relief to consumers while ensuring long-term financial health for states.
With billions in potential revenue at stake, and political consensus still elusive, all eyes remain on the outcome of this high-stakes meeting.