GST Council to Meet in September to Discuss Major Tax Reforms
The Goods and Services Tax (GST) Council will hold a two-day meeting on September 3-4 in New Delhi to deliberate on key reforms. The agenda is expected to include a proposal to simplify the tax structure by reducing the slabs from four to two (5% and 18%), with a special 40% rate for select demerit goods. Discussions may also cover GST exemptions for health and life insurance. Opposition-ruled states have raised concerns about potential revenue shortfalls from the proposed changes.
Unpacked:
Currently, GST has four main slabs: 5%, 12%, 18%, and 28%. The proposed reform would reduce this to two slabs—5% and 18%—with a special 40% rate for certain demerit goods, aiming to simplify the tax structure and compliance.
Opposition-ruled states worry that reducing the number of slabs, especially eliminating higher rates, could lower their tax collections. They rely on higher GST rates for significant revenues and fear simplification may reduce fiscal autonomy and funds needed for state programs.
Demerit goods are products considered harmful, such as tobacco, luxury cars, or sugary drinks. A 40% GST rate is proposed to discourage consumption and generate revenue, offsetting losses from lowering other GST rates.
Exempting health and life insurance from GST could make insurance more affordable, potentially increasing coverage among citizens. However, it may reduce government tax revenue from these sectors.