GST Council Meeting Overview
The GST Council meeting, led by Finance Minister Nirmala Sitharaman, is taking place in New Delhi over two days to discuss significant changes in the Goods and Services Tax (GST) structure, aiming for lower tax rates on various items.
Proposed Two Slab Structure
- The Council will consider a reform proposal to reduce GST slabs from four to two: 5% and 18%.
- 99% of items currently taxed at 12% will be moved to the 5% slab.
- 90% of items currently in the 28% bracket will shift to 18%.
- A 40% tax is proposed for select sin goods such as tobacco and luxury cars.
Challenges and Reactions
- There is opposition from states demanding compensation for potential revenue losses.
- The Fitment Panel has approved the two-slab structure for GST.
Current GST Structure
The current GST structure, implemented on July 1, 2017, includes four tax slabs: 5%, 12%, 18%, and 28%, along with a compensation cess on luxury and demerit goods to offset revenue loss for states.
Next-Gen GST Reforms
- The plan was unveiled by Prime Minister Modi during his Independence speech on August 15.
- A Group of Ministers (GoM) has consented to the proposal to eliminate the 12% and 28% slabs, supporting a tax reduction.
- Discussed recommendations include charging electric vehicles (EVs) priced up to Rs 40 lakh at 18% GST, although the Centre prefers 5% to encourage EV adoption.
Expected Changes in Tax Rates
- Daily use items like ghee, nuts, and non-aerated drinks might be moved from the 12% to the 5% slab.
- Insurance premiums may be taxed at 5% or potentially at 0% instead of the current 18%.
- Electronics such as certain TVs and refrigerators could move from the 28% to the 18% bracket.
- Cars might see a differential rate, with entry-level models at 18%, while SUVs could be taxed at 40%.
