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GST Rate Cuts Expand Tax Base as Effective Rate Falls
After GST rates were changed in September 2025, more goods and services were reported for tax.
From October 2025 to July 2026, taxable supply grew by 25.8% compared with the year before.
Supply to individual consumers grew by 26.7%.
The total tax liability rose too, but by less than the taxable supply.
This meant the effective tax rate on domestic taxable supply went down from 14.55% to 13.13%.
An official said spending stayed steady and the feared drop in revenue did not happen.
The GST Council also plans to discuss ways to make refunds and other tax processes easier.
It is not planning rate changes at this meeting.
From October 2025 to July 2026, taxable supply rose 25.8% year-on-year and business-to-consumer supply increased 26.7%.
Gross tax liability grew 13.6%, while the effective rate on domestic taxable supply fell from 14.55% to 13.13%.
An official said consumption held up, the tax base widened and the feared revenue shock did not occur.
The 56th GST Council meeting introduced a simpler structure of 5% and 18% rates, plus a 40% rate for demerit and sin goods.
The upcoming 57th meeting is expected to consider process reforms; tax rate changes are not on its agenda.
- Who
- The GST Council and GST officials.
- What
- The tax base expanded after rate changes, while the effective rate fell; the next Council meeting is expected to consider process reforms.
- Where
- The 56th GST Council meeting was held in New Delhi.
- When
- Tax-base figures cover October 2025 to July 2026; the 57th meeting is described as taking place on Thursday.
- Why
- The September 2025 rate cuts and slab changes were followed by wider taxable supply; proposed reforms aim to simplify and improve tax processes.
Key facts
- Taxable supply growth
- 25.8% year-on-year, October 2025 to July 2026
- Business-to-consumer supply growth
- 26.7% over the same period
- Gross tax liability growth
- 13.6%
- Effective domestic tax rate
- Declined from 14.55% to 13.13%
- 56th GST Council meeting
- Held September 3-4, 2025, in New Delhi
- Revised rate structure
- 5% and 18% rates, plus a 40% special rate for demerit and sin goods
- Rate-change schedule
- Going forward, rate changes are to be considered annually and take effect April 1
Quotes
Senior official
An unnamed senior official commenting on GST revenue and the tax base.
“Consumption has held up and the base has widened while the revenue has stabilised”
financialexpress.com
Sources
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