GST Council Meeting Aims to Ease Consumer Burdens with Potential Tax Reductions

In a significant move that could ease the financial burden on consumers, the 55th Goods and Services Tax (GST) Council meeting commenced on Saturday, focusing on potential reductions in tax rates for health and life insurance, along with reviewing a comprehensive list of 148 other items. Chaired by Union Finance Minister Nirmala Sitharaman, the Council is expected to deliberate on various proposals, including the inclusion of Aviation Turbine Fuel (ATF) under the GST framework. Central to the discussions is a proposal arising from a Group of Ministers (GoM), led by Bihar Deputy Chief Minister Samrat Chaudhary, which aims to exempt premiums paid for term life insurance policies from GST. Furthermore, there is a plan to exempt health insurance premiums for senior citizens, while also proposing the same exemption for individuals purchasing health insurance with coverage up to ₹5 lakh. However, premiums for health insurance covering amounts exceeding ₹5 lakh would still be subject to the prevailing 18 percent GST. The sentiment among most states is leaning towards lowering the taxes on these insurance premiums as a means of providing relief to the common man, especially in light of rising healthcare costs. This could make essential health and life insurance products more accessible for a larger segment of the population. In addition to insurance, the GoM has put forth proposals to adjust the GST rates on several consumer goods and services. Among these proposals is a reduction in the tax rate on food delivery services, such as Swiggy and Zomato, from the current 18 percent to 5 percent without input tax credit. This shift aims to enhance affordability for consumers relying on these services. On the flip side, a tax increase is suggested for the sale of used electric vehicles (EVs) and small petrol and diesel vehicles, raising the GST rate from 12 percent to 18 percent. This change aligns the taxation of smaller vehicles with that of larger old vehicles, reflecting a broader strategy of economic alignment within the automotive sector. Another critical aspect of the meeting involves the future of the GST compensation cess, which is set to expire in March 2026. The GoM is expected to recommend a six-month extension until June 2025 for further deliberation on this matter, following the establishment of a ministerial panel to chart the next steps. The GST Council will also review recommendations from a rate rationalisation panel suggesting changes in the taxation of 148 items. Particularly notable is the proposed increase in tax on sin goods, including aerated drinks and tobacco products, from 28 percent to 35 percent, aimed at discouraging consumption of these products while potentially increasing government revenues. In terms of the apparel sector, the proposed changes will see a tiered tax structure, where garments under ₹1,500 will attract a 5 percent GST, between ₹1,500 and ₹10,000 will incur 18 percent, and those priced above ₹10,000 will carry a 28 percent tax. Similarly, significant increases are proposed for luxury items, such as footwear over ₹15,000 and wristwatches exceeding ₹25,000, which would see their GST rise from 18 percent to 28 percent. As the meeting unfolds, officials indicate that while some minor adjustments may be made, no major overhaul of the tax structure is anticipated. Telangana Deputy Chief Minister Mallu Bhatti Vikramarka reiterated the need for a flexible taxation system that does not impose excessive burdens on citizens. Additionally, the GoM has proposed reducing GST on packaged drinking water containers of 20 litres or more to 5 percent from 18 percent, and similarly decreasing tax rates on bicycles under ₹10,000 and exercise notebooks, making these everyday items more affordable. As discussions progress, the outcome of this GST Council meeting could signal a new era of financial relief for consumers while also addressing broader economic and environmental concerns through careful tax adjustments.