GST News: Consumers are expected to get a big relief in the upcoming GST Council meeting. This meeting will not only review the tax slabs, but it can also take important steps towards making the future GST structure simple and practical.
Consumers may get great relief in the upcoming meeting of the GST Council. The government is considering reducing the GST rates on many such products, which are being used by the middle and low income group people. Along with this, a proposal to reduce tax on expensive products like air conditioners is also under consideration. The government is doing a comprehensive review of the eight-year-old Goods and Services Tax (GST) structure.
In this review, the emphasis will be on reducing the tax rate on consumer goods falling in the 12% tax slab. The 12 percent GST slab includes many essential items including butter, ghee, processed food items, mobile, fruit juice, pickles, jam, chutney, coconut water, umbrella, bicycle, toothpaste, shoes and clothes, which are used more by the common man.
Compensation Cess is going to end in March 2026. It is given to the states to compensate for the revenue loss after the implementation of GST. After the abolition of compensation cess, the central government is now planning to impose a new cess on ‘sin goods’ like tobacco. Its purpose is to compensate the states for the possible loss due to the abolition of compensation cess.
GST on insurance may be reduced
According to a report by Times of India, the central government is in favor of completely abolishing the current 18% GST on pure term insurance plans. However, insurance companies have demanded to bring it down to 12%. The government believes that this will provide direct relief to middle class consumers. Apart from this, there is a possibility of reduction in tax on health insurance as well, but a final decision has not been taken on this yet.
Removal of 12% slab can also be considered
According to sources, the government is considering abolishing the 12% tax slab completely. However, the tax rate can be increased on products that are used in business activities. This will help the government limit the revenue deficit.
Increasing consumption can reduce revenue deficit
The government believes that reducing tax rates will increase the demand for products, which will compensate for the revenue loss to some extent. According to a senior official, it is not right to assess revenue based only on data. If reducing tax rates increases consumption, the government may benefit in the long run.
This time the aim of GST reforms is to create a permanent tax structure which does not require frequent changes. The government wants traders and consumers to get clarity and stability in the tax system. However, building political consensus on this entire reform proposal will be a big challenge. Earlier, many times states have opposed tax cuts due to fear of revenue loss.