News Brief

Nirmala Sitharaman To Meet GST Council And State Finance Ministers In December—Here's What's Expected For Tax Rationalisation

Nishtha Anushree

Nov 12, 2024, 03:13 PM | Updated 03:13 PM IST


Finance Minister Nirmala Sitharaman.
Finance Minister Nirmala Sitharaman.

Union Finance Minister Nirmala Sitharaman is expected to meet with State Finance Ministers on 21-22 December for pre-budget consultations and a Goods and Service Tax (GST) Council meeting, according to an official.

This gathering holds particular importance as State Finance Ministers will present their proposals for the 2025-26 Budget, scheduled for release on 1 February 2025.

During these two days, the 55th GST Council meeting is anticipated to address the awaited decision on reducing or exempting GST rates for health and life insurance.

Additionally, the Council may consider tax rate adjustments, potentially reducing GST on several common items from 12 per cent to 5 per cent, following recommendations from a panel of State Ministers.

The two-day meeting is likely to be held in Rajasthan, either in Jaisalmer or Jodhpur, according to the official cited by The Hindu.

In recent discussions, the group of ministers (GoM) on GST for health and life insurance has reached a preliminary agreement to exempt GST on term life insurance and health insurance premiums for senior citizens.

For health insurance with coverage up to Rs 5 lakh for others, an exemption has been proposed, while an 18 per cent GST will remain on policies exceeding Rs 5 lakh.

The GST Council had previously assigned the GoM to finalise its report on GST for insurance by the end of October.

Separately, the GoM on GST rate rationalisation has suggested revising tax rates on several goods, including packaged drinking water, bicycles, exercise notebooks, luxury wristwatches, and high-end shoes. This rate adjustment could lead to a projected revenue increase of approximately Rs 22,000 crore.

The proposed changes include reducing GST on 20-liter and above packaged drinking water from 18 per cent to 5 per cent, and lowering GST on bicycles under Rs 10,000 to 5 per cent from 12 per cent.

The GST rate on exercise notebooks may also drop to 5 per cent from 12 per cent. However, for items like shoes above Rs 15,000 per pair and wristwatches costing over Rs 25,000, an increase from 18 per cent to 28 per cent has been proposed.

Bihar Deputy Chief Minister Samrat Chaudhary heads the 13-member GoM on health and life insurance and the 6-member GoM on rate rationalisation.

Currently, the GST structure includes four tax slabs: 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Essential items are either exempted or taxed at the lowest rate, while luxury goods fall under the highest 28 per cent slab, with additional cess on certain sin goods.

Given that the average GST rate has dropped below the revenue-neutral rate of 15.3 per cent, discussions on rationalising GST rates have become necessary.

Nishtha Anushree is Senior Sub-editor at Swarajya. She tweets at @nishthaanushree.


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