GUWAHATI: Ahead of the upcoming GST Council meeting on December 21 in Jaisalmer, the Group of Ministers (GoM) set up by the council has recommended changes to the Goods and Services Tax (GST) structure, including a proposed 35% special GST rate for tobacco products, aerated beverages, and other "sin" goods. This new rate would be in addition to the existing GST on these items, aiming to boost tax revenue from high-risk products.
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The GoM, led by Bihar Deputy Chief Minister Samrat Choudhary, is expected to discuss this proposal in detail at the GST Council's next meeting. Currently, tobacco products are taxed at 28% GST, with an additional compensation tax ranging from 11% to 290%, while aerated beverages are taxed at 28% with a 12% compensation tax. The proposed 35% special rate would further increase the tax burden on these products.
In addition to the sin goods tax revisions, the GoM has recommended changes to the GST slabs for more than 148 items, including ready-made garments, footwear, cosmetics, and luxury goods like watches and handbags. For ready-made garments, the GoM has suggested imposing a 5% GST on items priced up to Rs 1,500, an 18% GST for garments priced between Rs 1,500 and Rs 10,000, and a 28% GST on items above Rs 10,000. The revisions aim to better align tax rates with the value of the products, ensuring that luxury goods face higher taxes, while everyday essentials like bottled water, bicycles, and exercise notebooks could see reduced GST rates.
The GoM has also proposed a potential restructuring of GST on health and life insurance premiums. Currently taxed at 18%, there is growing support for exempting premiums paid by senior citizens for health insurance and for term life insurance. Health insurance premiums up to Rs 5 lakh may be exempted from GST, while premiums above this threshold could continue to face the existing 18% rate.
Additionally, the GoM is reviewing tax rates on other commonly used items such as exercise notebooks, which could see a reduction in GST from 12% to 5%.
The GoM, chaired by Minister of State for Finance Pankaj Chaudhary, has also sought a six-month extension to submit its report on the compensation tax, which was introduced to compensate states for revenue losses due to GST implementation. The tax, originally set to expire in June 2022, was extended until March 2026, and the GoM is still reviewing the legal implications of removing the tax on sin and luxury goods.
The GST Council's meeting in Jaisalmer on December 21 will be crucial in deciding on these proposals, which could reshape the GST structure and impact both consumers and businesses.
