Union Finance Minister Nirmala Sitharaman is set to meet with state finance ministers on December 21-22 for pre-budget consultations and a meeting of the GST Council, according to official sources. This meeting is significant as state finance ministers will present their recommendations for the 2025-26 Union Budget, which is scheduled for release on February 1, 2025.

During this two-day event, the 55th GST Council meeting will take place, with one of the key items being the decision on whether health and life insurance premiums should be exempt from or taxed at a lower GST rate.

The Council may also discuss a tax rate rationalization proposal aimed at reducing taxes on several common goods. The suggestions, made by a panel of state ministers, recommend lowering the GST rate from 12% to 5% on a range of everyday items.

The meeting will take place in Rajasthan, either in Jaisalmer or Jodhpur.

Last month, a group of ministers (GoM) on health and life insurance reached a broad agreement to exempt GST on premiums for term life insurance policies and health insurance for senior citizens. The group also proposed exempting GST on premiums for health insurance policies covering individuals (excluding senior citizens) for amounts up to Rs 5 lakh. However, the 18% GST will still apply to premiums for policies providing coverage over Rs 5 lakh.

The GST Council's 54th meeting in September assigned the GoM with finalizing its report on insurance GST by the end of October.

Meanwhile, the GoM on GST rate rationalization suggested adjustments to the tax rates on various goods, including packaged drinking water, bicycles, exercise notebooks, luxury wristwatches, and shoes. The proposal, if accepted by the GST Council, could result in an estimated revenue gain of around Rs 22,000 crore.

The GoM’s recommendations include reducing the GST on packaged drinking water (20 liters and above) from 18% to 5%, as well as lowering the GST on bicycles priced below Rs 10,000 and exercise notebooks from 12% to 5%. On the other hand, the GoM has recommended increasing GST on luxury items such as shoes priced over Rs 15,000 per pair and wristwatches valued above Rs 25,000, raising their rates from 18% to 28%.

Bihar's Deputy Chief Minister Samrat Chaudhary leads the GoM on health and life insurance, and the 6-member GoM on rate rationalization.

Under the current GST structure, there are four tax slabs: 5%, 12%, 18%, and 28%. Essential items are either exempt from GST or taxed at the lowest slab, while luxury and non-essential items attract the highest rates. Additionally, luxury and "sin" goods are subject to a cess on top of the 28% slab. The average GST rate has fallen below the revenue-neutral rate of 15.3%, which has sparked discussions about the need for a tax rate overhaul.

Read More:

Major Tax Fraud Uncovered: Rs.25,000-Cr Evasion Linked to 18,000 Fake Companies

Oil Prices Dip as Chinese Stimulus Disappoints and Supply Forecast Rises