During the meeting, state finance ministers will present their recommendations for the 2025-26 Budget to be tabled on February 1, 2025. The GST Council is also likely to take up some rationalisation exercises and slash tax rates on a number of common items from 12 per cent to 5 per cent as per the recommendations of a panel of state ministers.
The 55th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, is scheduled to take place on December 21, 2024, in Jaisalmer, Rajasthan. This highly anticipated gathering of state and central finance ministers is expected to address critical issues around GST rate rationalisation, tax reliefs, and budget recommendations.
Why the Meeting Was Delayed
Initially planned for November, the GST Council meeting was postponed due to the Assembly elections in Maharashtra and Jharkhand, followed by the Winter Session of Parliament.
Agenda Highlights for the 55th GST Council Meeting
- GST Rate Rationalisation
- The Council will consider recommendations from a Group of Ministers (GoM) on revising GST rates for various goods and services.
- Proposed reductions include:
- Lowering GST on essential items like 20-litre packaged drinking water bottles, bicycles, and exercise notebooks from 12% to 5%.
- Tax hikes are likely on luxury goods:
- Wristwatches priced above ₹25,000 and shoes costing over ₹15,000 may see GST increased to 28% from the current 18%.
- Insurance Tax Reliefs
- Major proposals to exempt GST include:
- Term life insurance premiums.
- Health insurance premiums for policies up to ₹5 lakh, especially for senior citizens aged 60 and above.
- Policies exceeding ₹5 lakh will continue to attract 18% GST.
- Impact on Revenue:
- Exemptions are estimated to cost the exchequer approximately ₹3,200 crore annually, including ₹200 crore for term life insurance and ₹3,000 crore for senior citizens’ health insurance.
- Major proposals to exempt GST include:
- Revenue Considerations
- The panel has recommended rate adjustments on 100 products, aimed at generating an additional ₹22,000 crore annually.
- This revenue is expected to be equally shared between the Centre and states.
- Budget 2025-26 Recommendations
- State finance ministers will present suggestions for the upcoming Union Budget, which will be tabled on February 1, 2025.
GST Structure and Current Challenges
- India’s GST follows a four-tier tax structure with slabs at 5%, 12%, 18%, and 28%. Essential items are taxed minimally or exempted, while luxury and sin goods fall under the highest tax slab, often with additional cess.
- The average GST rate has dropped below the revenue-neutral rate of 15.3%, prompting discussions on rationalisation to stabilise government revenues.
What It Means for Consumers and States
- Benefits for Consumers:
- Potential reduction in insurance premiums and costs of essential goods like notebooks and bicycles.
- Relief for senior citizens, who face mounting healthcare costs.
- Concerns for State Governments:
- States such as Kerala and West Bengal have expressed reservations about revenue shortfalls resulting from reduced GST rates amidst existing fiscal pressures.
Conclusion
The 55th GST Council meeting holds the potential to reshape India’s GST framework significantly. Proposed tax reforms aim to balance affordability for consumers with sustainable revenue generation for governments. Stakeholders across industries and consumer groups are eagerly awaiting decisions that could impact everyday expenses, especially in the domains of healthcare, insurance, and essential goods.
Stay tuned for updates from the GST Council’s deliberations in Jaisalmer as they unfold.
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