The Centre is preparing for a significant revenue shortfall as it readies a major overhaul of the Goods and Services Tax (GST) structure, Finance Ministry sources said on Sunday.
The revised GST framework is expected to be rolled out by Vijayadashami (October 2), with the government bracing for a potential loss of ₹40,000 crore.
According to officials, the Fitment Committee, a panel of GST Secretariat officers, has drafted estimates of the anticipated deficit that will need to be absorbed jointly by the Centre and the states.
The revamp proposes a two-tier GST rate structure of 5% and 18%, along with a 40% levy on sin goods. While the new system promises greater simplicity, it is expected to weigh heavily on revenues.
Adding to the challenge, the Centre faces an additional shortfall of nearly ₹20,000 crore in GST and TDS collections following the recent decision that effectively bans online gaming platforms.
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Officials maintained that the revenue impact would be temporary, suggesting it could be offset by stronger consumer spending. Earlier this year, the government announced an income tax rebate for salaried individuals earning up to Rs 12.75 lakh annually in a bid to boost consumption.
For most services, major changes are not expected, except for a proposal to exempt individual health and life insurance premiums from GST.
The 56th meeting of the GST Council will be held in New Delhi on September 3-4, preceded by an officers’ meeting on September 2. The session, originally scheduled for late September or early October, was brought forward after consultations with the states.
“If all processes are in place, implementation could begin early, around Dussehra,” an official said.
The Group of Ministers (GoM) on rate rationalisation, which met in Delhi on August 20-21, endorsed the proposal to remove the 12% and 28% tax slabs. State ministers participating in the meeting agreed to move towards a simplified two-tier GST structure.
The developments come in the wake of Prime Minister Narendra Modi’s Independence Day address, in which he promised next-generation GST reforms by Diwali.
“The government will bring Next-Generation GST reforms to reduce the tax burden on the common man. It will be a Diwali gift for you,” Modi said, stressing that the move was aimed at easing taxation for citizens and giving a push to economic activity.
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