new delhi, Sept. 1 -- Heartburn in state capitals looms over a landmark indirect tax reform expected this week, given that a proposal to rework rates and raise spending could also sap tax revenue. While the Centre will assure states that it will examine their concerns at the Goods and Services Tax (GST) Council meeting over Wednesday and Thursday, it does not plan to compensate them for losses like in the early years of GST, two people aware of the matter said. The GST restructuring aims to simplify the current multi-tiered system into a two-slab structure of 5% and 18%, while removing the 12% and 28% rates and introducing a special 40% rate for luxury and "sin" goods. The restructuring is expected to shrink this year's combined GST collection by Rs.50,000-55,000 crore. "States' concerns around short-term revenue loss will be looked into. Increased consumption demand will help make up for any revenue impact as can be seen from past instances of tax rate cuts," said one of the two persons quoted above. Officials from the Centre and states will meet a day before the GST Council's meeting. The Centre rarely makes its proposals to the GST Council known in advance. However, Prime Minister Narendra Modi's Independence Day announcement of GST relief suggests the importance the government accords to delivering a consumption stimulus, following an income tax relief earlier this year, interest rate cuts and cooling inflation. Queries sent to the Union finance ministry and the GST Council Secretariat seeking comments remained unanswered. Ministers and representatives of eight states-Himachal Pradesh, Kerala Jharkhand, Karnataka, Punjab, Tamil Nadu, Telangana and West Bengal-met in New Delhi on Friday, seeking a compensation mechanism as had existed between FY18 and FY22. The eight states are ruled by parties other than the Bharatiya Janata Party, which governs at the Centre. In the first five years of GST, the Centre compensated states for their revenue loss due to the GST shift, using a so-called compensation cess. The cess ended in 2022, but was extended for four years, and the cess revenue was used to repay loans that the Centre borrowed in covid years to help state finances. The cess comes to an end in March 2026. The eight states will table a joint statement at the GST Council meeting voicing their concerns, a third person said. It will state that between FY18 and FY24, the net effective GST rate fell from 14.4% to 11.6% due to tax rate cuts. With the proposed reductions, it is expected to further fall below 10%, the person said on the condition of anonymity. Other than revenue-related concerns, states have no objection to the principle of tax rate rationalisation, the person added. However, the Centre hopes to rely on data showing that despite the cuts, GST revenue has improved. In FY19, the monthly average gross GST collection rose nearly 6% from a year earlier despite multiple rounds of GST rate cuts....