The 55th GST Council is set to meet on Saturday, December 21, to make key decisions on various tax adjustments. Among the major topics on the agenda is the reduction of tax rates on life and health insurance premiums, as well as a proposed increase on luxury items such as high-end wristwatches, shoes, and apparel. The Council will also consider introducing a separate 35% tax rate for sin goods like tobacco, aerated beverages, and cigarettes.
The 55th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and attended by state counterparts, will discuss tax rate changes for about 148 items. One of the key proposals includes the inclusion of Aviation Turbine Fuel (ATF) in the Goods and Services Tax (GST) framework. This would bring a significant cost component for the airline industry under GST, which could impact the overall operational costs of airlines.
There has been a proposal to lower the GST rate for food delivery platforms such as Swiggy and Zomato. Currently set at 18% with the input tax credit, it is suggested that this be reduced to 5%, but without the input tax credit. This move is expected to make food delivery services more affordable for consumers, providing a financial relief amidst rising costs.
In addition, the Fitment Committee, comprising tax officers from both the Centre and states, is expected to propose a hike in GST rates for used electric vehicles (EVs) and small petrol and diesel cars. The proposed rate increase from 12% to 18% would align the tax treatment of older, smaller vehicles with that of used larger vehicles.
A Group of Ministers (GoM), formed under Bihar Deputy Chief Minister Samrat Chaudhary, had previously agreed to exempt term life insurance premiums from GST. The Council will also deliberate on a proposal to exempt health insurance premiums paid by senior citizens, as well as premiums for policies with coverage up to Rs 5 lakh.
The GST Council will also review the GoM's recommendations for rate changes on 148 items, which include luxury and sin goods. The GoM has proposed an increase in the tax rate for sin goods to 35% from the current 28%. These goods would include items like tobacco products, aerated drinks, and cigarettes, which would fall under a new tax bracket for harmful or luxury items.
Another area of discussion is the proposed changes to tax rates on apparel. The GoM has recommended that ready-made garments priced under Rs 1,500 attract a 5% GST, garments priced between Rs 1,500 and Rs 10,000 be taxed at 18%, and those priced above Rs 10,000 be subject to 28% GST. Currently, garments priced up to Rs 1,000 are taxed at 5%, while those above Rs 1,000 are taxed at 12%.
The GoM has also proposed a reduction in tax on several items, such as packaged drinking water (20 litres and above) from 18% to 5%, bicycles costing less than Rs10,000 from 12 percent to 5 percent , and exercise notebooks from 12 percent to 5 percent . In total, the GoM has recommended changes to 148 items, with an expectation that these adjustments will have a positive impact on government revenue.
The GST framework, which came into effect on July 1, 2017, amalgamated several central and state taxes into a single tax structure. However, some essential commodities, including crude oil, natural gas, petrol, diesel, and aviation turbine fuel (ATF), were initially excluded from the GST regime. While excise duty and VAT continued to be levied on these items, the inclusion of ATF under GST could mark a significant shift in how the aviation industry is taxed.
The Group of Ministers on GST Compensation Cess is likely to get a six-month extension to submit their report, with the cess playing a crucial role in compensating states for any revenue losses after the introduction of GST.
The outcome of these discussions will have a widespread impact on consumers, industries, and state governments as the GST Council seeks to streamline tax rates and create a fairer tax structure for all.