The Union government has projected a net revenue loss of nearly ₹47,000 crore from the ongoing Goods and Services Tax (GST) rate rationalisation exercise, the Finance Ministry informed the Lok Sabha on Monday. The disclosure comes amid continued deliberations to simplify the GST slab structure and correct inverted duty anomalies.
Replying to a parliamentary query, the ministry said the proposed rationalisation could result in a gross revenue implication of about ₹93,300 crore. However, this impact is expected to be partly offset by higher collections from select items being moved from the 28 per cent GST slab to a proposed 40 per cent tax bracket, generating additional revenue of around ₹45,570 crore.
“Based on consumption patterns and the value chain during FY24, items shifted from 28 per cent to 40 per cent GST are estimated to contribute approximately ₹45,570 crore in additional revenue,” the ministry stated. Taken together, the measures would result in a net negative impact of around ₹47,700 crore, it added, while cautioning that these estimates are indicative and not final.
The ministry underlined that GST collections are dynamic, noting that lower tax rates often improve compliance and reduce litigation, leading to revenue buoyancy over time. GST rate rationalisation is aimed at simplifying the current multi-slab tax structure and enhancing ease of doing business.
Addressing concerns raised by states, the Centre said there is no proposal at present to form a Group of Ministers under the GST Council to address initial revenue losses. During the 56th GST Council meeting, Kerala flagged the possibility of higher revenue impact due to its consumption pattern.
The Kerala government estimated an annual revenue loss of ₹2,500 crore from automobiles, insurance, cement and electronics alone, with total losses likely to exceed ₹8,000 crore annually. The Centre reiterated that the full impact of rationalisation would be assessed over time, factoring in changes in consumption, compliance and economic growth.
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