GST Council Meeting September 2025: Rate Rationalisation and Federal Concerns
By Suryavanshi IAS
Introduction
On September 3, 2025, the Goods and Services Tax (GST) Council began its two-day meeting to discuss crucial reforms, including GST rate rationalisation, reducing tax incidence, and simplifying GST compliance procedures. First proposed by the Union Government on Independence Day 2025, these reforms carry significant implications for India’s economy, governance, and federalism. For UPSC aspirants, this development is important for GS Paper II (Polity & Governance) and GS Paper III (Economy).
Key Proposals of the Centre
GST Rate Restructuring
Abolition of 12% and 28% slabs.
Retention of 5% and 18% slabs.
Introduction of a new 40% slab for luxury and sin goods.
Compensation Cess to be removed.
Reclassification of Goods
99% of items in the 12% slab → shifted to 5%.
90% of items in the 28% slab → shifted to 18%.
Remaining items (luxury/sin goods) → 40% slab.
Simplification Measures
Easier GST registration.
Faster filing and return processes.
Claimed Benefits by the Centre
Relief for the common man, women, students, middle class, and farmers.
Lower tax rates on both essential goods and aspirational products.
Aim to boost consumption demand by reducing household tax burden.
Revenue Concerns
Economists estimate an annual revenue loss of ₹60,000 crore – ₹1.8 lakh crore.
States fear increased revenue dependency on the Centre.
Debate between growth stimulus vs. fiscal prudence.
States’ Reactions
Non-BJP ruled states (Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal) submitted a joint note:
Flagged revenue shortfall concerns.
Sought compensation mechanisms from Centre.
Stressed fiscal protection for states.
Andhra Pradesh (TDP, NDA ally) supported reforms, citing benefit for the common man.
Constitutional & Federal Dimensions
Article 279A: GST Council established.
Composition:
Union Finance Minister (Chairperson).
Union MoS Finance.
State Finance Ministers.
Voting power:
Centre → 1/3rd weight.
States collectively → 2/3rd weight.
3/4th majority required for decisions.
Reflects cooperative federalism, but ongoing tensions show strains in Centre-State fiscal balance.
Relevance to UPSC
Prelims
Structure, composition, and voting system of GST Council.
Mains GS Paper II (Governance)
Cooperative vs. confrontational federalism.
Role of institutions in fiscal decision-making.
Mains GS Paper III (Economy)
Tax reforms and indirect taxation.
Implications of rate rationalisation on inflation, consumption, and fiscal deficit.
Revenue distribution and fiscal federalism.
Essay Paper
Economic reforms and Centre-State relations.
Balancing efficiency, equity, and fiscal stability.
Conclusion
The September 2025 GST Council meeting highlights the twin goals of simplification and inclusivity in taxation, while also exposing the fragile nature of Centre-State fiscal relations. For aspirants, this serves as a case study on the interplay of economic policy, cooperative federalism, and governance challenges in India’s evolving tax regime.
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