What to Expect in the Next GST Council Meeting: Key Agendas and Policy Shifts

The 56th GST Council meeting, expected in early July 2025, comes after the longest pause in its history. As per the GST Council’s procedural norms, the Council is mandated to meet at least once every three months. This upcoming meeting will take place nearly six months after the last one, marking a huge deviation from the usual frequency. The extended gap has heightened expectations, as several unresolved issues and pending reforms await discussion.

The meeting is strategically scheduled before the Monsoon Session to allow the Council to make critical decisions that may require parliamentary attention. The exact date is yet to be officially announced, but discussions are expected to cover a broad spectrum of GST-related concerns.

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Key Agendas

GST Rate Rationalisation:

One of the primary agenda items is the potential restructuring of the current four-tier GST slab system (5%, 12%, 18%, and 28%). A major proposal under consideration is the elimination of the 12% slab, with goods and services under this rate to be reclassified into the 5% or 18% categories. This move aims to simplify the structure and reduce compliance burdens. Corrections in inverted duty structures in sectors such as textiles, footwear, fertilisers, paper, and packaging are also expected.

Review of Compensation Cess:

Another key focus will be on the future of the compensation cess. This cess was introduced to compensate states for any revenue loss following the implementation of GST in July 2017 and is set to expire on March 31, 2026. With this deadline approaching, the Council may discuss three possible scenarios: complete withdrawal of the cess, phased discontinuation, or its replacement with a new levy, such as a health and clean energy cess.

The idea of repurposing the cess to fund public health and environmental initiatives has gained traction but would likely require constitutional amendments and consensus among states. A report from a Group of Ministers (GoM) is expected to inform the Council’s deliberations on this matter.

Compliance Simplification:

Improving compliance efficiency remains a recurring theme in GST reforms. The Council is expected to explore measures such as:

• Simplifying reconciliation between GSTR-1 (outward supplies) and GSTR-3B (summary return),
• Automating input tax credit (ITC) matching to reduce mismatches and disputes,
• Revisiting e-invoicing thresholds to bring more businesses under structured compliance while easing the burden on micro-enterprises.

These reforms aim to reduce errors, minimize litigation, and enhance taxpayer trust, particularly among MSMEs.

Sector-Specific Issues:

Several industries are awaiting clarifications and adjustments to current GST rates and classifications:

• Drones: Currently, GST rates for drones vary based on usage and features, ranging from 5% to 28%. A unified 5% rate for commercial drones is proposed to eliminate classification confusion and support India's growing drone ecosystem.
• Health and Life Insurance: At present, these services are taxed at 18%, making them relatively expensive for the average consumer. Reducing GST on insurance premiums is under consideration to improve affordability and encourage wider coverage.
• Online Gaming and Casinos: With legal clarity emerging from recent court judgments, the Council may decide on standardised GST treatment for gaming, betting, and casinos. This would ensure uniformity and prevent tax evasion.
• Restaurant Services in Luxury Hotels: Final guidelines are expected on GST applicability for restaurants operating within luxury hotels, which has been a subject of industry concern and varied interpretations.

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Other Considerations:

The Council may also deliberate on policy inputs related to virtual digital assets, proposed waivers on tax recoveries arising from common trade practices, and sector-specific guidance for industries such as e-commerce, real estate, and gaming.

Current GST Rates on Drones (Contextual Overview):

This classification is expected to be simplified to a unified rate for commercial use.

Potential Policy Shifts

• GST Slab Simplification: Moving from four to three slabs by removing the 12% rate to reduce compliance costs and boost consumption.
• Unified Tax Rate for Drones: Implementing a standard 5% GST for commercial drones to support industry growth.
• New Cess Structure: Introducing a health and clean energy cess post-2026 to replace the current compensation cess.
• Amnesty Scheme: Rolling out relief measures for old GST disputes to ease litigation burdens and improve taxpayer relations.

Implementation and Notifications

Any decisions taken during the meeting are expected to be implemented through notifications under Section 9(1) of the CGST Act and relevant amendments to CGST Rules, including Rule 36(4) concerning ITC claims. Clarifying circulars addressing retrospective tax demands may also follow within a few weeks.

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Conclusion

The upcoming GST Council meeting is expected to focus on crucial reforms including rate rationalisation, simplification of compliance procedures, and targeted relief for specific sectors. Businesses and taxpayers should closely monitor official channels for updates and prepare for likely changes in the tax landscape. This meeting has the potential to significantly shape the next phase of GST evolution in India.

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