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Chief Economic Advisor (CEA) V Anantha Nageswaran has expressed confidence that the Centre's newly approved GST reforms will stimulate consumption across India, even as some states remain worried about potential revenue losses. Speaking at an event, Nageswaran said the GST Council's decision onSeptember 3, 2025, to move from the existing four-slab structure to a two-tier systemwith rates of 5% and 18% along with a special 40% rate for luxury and sin goods was a landmark step in rationalising th
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FAQ :
The new GST structure features a 5% slab for essential goods and services, an 18% slab for most other products and services, and a special 40% rate for luxury and sin goods.
The previous 12% and 28% GST slabs are being eliminated as part of the reforms.
CEA Nageswaran considers it premature to assume states will lose revenue, suggesting that rate rationalisation could spur economic activity and expand the tax base.
Nageswaran pointed out that the pre-GST system offered no protection during economic downturns, whereas GST guaranteed states 14% annual revenue growth compensation in its initial years.
The 40% special rate applies to luxury and sin goods such as private helicopters, tobacco products, and aerated drinks.
Eight opposition-ruled states have requested the formation of a Group of Ministers (GoM) to study the revenue impact and propose compensation mechanisms.
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