Opposition states set conditions to protect fiscal interests in GST revision talks

Eight Opposition-ruled states, Karnataka, Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal have outlined specific conditions to safeguard their fiscal interests as they consider supporting the proposed reduction in GST slabs and lower rates on items of mass consumption.

The Central government has proposed streamlining the GST structure. Currently, it has four main slabs of 5 per cent, 12 per cent, 18 per cent, and 28 per cent, along with a compensation cess. Under the new plan, only two primary rates, 5 per cent and 18 per cent, would be retained, while a 40 per cent rate would apply to select ‘sin’ and ultra-luxury items.

The states have called for a clear mechanism to ensure that any reduction in GST rates benefits consumers directly. They have also demanded compensation for all states over a five-year period, with 2024–25 as the base year, to offset expected revenue losses.

In addition, they want any additional levies on ‘sin’ and luxury goods above the 40 per cent slab to be fully transferred to states, pointing out that the Centre currently retains nearly 17–18 per cent of its revenue from cesses that are not shared.

Congress leader Jairam Ramesh said these demands were “perfectly legitimate” and noted that they are supported by studies from the Union Finance Ministry’s think-tank, the National Institute of Public Finance and Policy (NIPFP).

Ramesh also reiterated the Congress party’s long-standing call for a “GST 2.0” that not only rationalises slabs and rates but also simplifies procedures and compliance requirements, especially for micro, small and medium enterprises, while ensuring that the interests of all states are fully protected.

Observers say the GST Council meeting scheduled for next week will be closely watched to see whether these conditions are addressed or whether the discussions remain limited to announcing headline rate reductions. Analysts note that the stances of these Opposition-led states underline the growing demand for a more equitable GST framework that reflects genuine cooperative federalism.