Sitharaman told reporters that the Council gave a ministerial committee led by Karnataka chief minister Basavaraj Bommai more time to recommend further GST rate rationalization steps after having accepted all its suggestions to roll back tax exemptions and correct tax anomalies.

Sitharaman explained that the proposed GST rate rationalization was required for restoring revenue neutrality in the shift to GST from the previous indirect tax regime five years ago. The Bommai committee deferred making suggestions on any major tax rate rejig in its interim report in view of the prevailing high inflation.

Tax exemptions have been withdrawn on a few items, and these will now be taxed as per the Council's decisions. These include cheques at 18%, pre-packaged and pre-labelled items such as curd, lassi and buttermilk at 5% and maps at 12%. Also, capital goods used in petroleum and coal bed methane exploration will now be taxed at 12% instead of 5%. The Council also decided to raise tax rates on items such as ink, knives and pumps from 12% to 18% and solar water heaters and leather from 5% to 12%. In addition, cut and polished diamonds will attract 1.5% GST, up from 0.25% now. Also, hotels with rent below ₹1,000 a night will attract 12%, and non-ICU hospital rooms with rent above ₹5,000 will be taxed at 5% without input tax credit.

Online traders will now be treated on par with offline traders for GST registration requirements with respect to intra-state trade. So far, they have needed GST registration irrespective of their sales. Now, they will not require registration if annual sales are up to ₹40 lakh for trade in goods within the state and ₹20 lakh for trade in services within the state. Also, traders who have signed up for a presumptive tax scheme—composition scheme —will now be allowed to make intra-state sales through e-commerce operators. This would be made effective from 1 January as it requires technical changes to be made on portals by e-commerce platforms.

The Council could not arrive at a decision on Wednesday about demands from about a dozen state ministers that their tax reform-related revenue losses should be compensated beyond June when the current scheme expires. "Broadly, statements were made that if not five years, but for some years, compensation should continue. I have heard them," the minister said. It is possible the Centre may examine the issue given that up to March 2026, it could collect more than the amount needed to repay the ₹2.69 trillion of loans raised to give liquidity support to states during the pandemic. In FY23, the Centre has projected ₹1.2 trillion of GST compensation cess collection. The Council also gave 15 days more to the Conrad Sangma panel to give a fresh hearing to the industry and states on the taxation of online gaming, horse racing and casinos. The GST Council will meet next in Madurai in August to decide on this issue and on setting up GST tribunals.

Further GST rate rationalization is very much on the Council's table. It is one thing for technology to correct any anomaly or a kind of inefficiency which will have a positive bearing on revenue collections, but the decline in the revenue-neutral rate requires a correction, Sitharaman said. Revenue-neutral rate of GST—the weighted average rate needed for the transition to the new indirect tax regime in 2017 to be a revenue-neutral affair to the exchequer—had declined over the years due to several rounds of tax cuts. The minister also explained that correction of duty inversions was needed to usher in investments across the value chain. The Council also cleared several measures to prevent fraudulent entities from getting GST registration.