Higher GST on sin goods to offset losses from insurance
An increase in goods and services tax (GST) on several items and a special levy of 35% on “sin goods” like cigarettes, as proposed by a group of ministers (GoM) formed by the GST Council, are expected to help partially offset revenue shortfalls due to abolition of the tax on insurance premiums, experts say.
According to sources, the GoM has estimated that the rejig of rates for 148 items is likely to result in an additional revenue of about Rs 22,000 crore every year for the Centre and states. This would, to some extent, offset the loss due to removal of GST on health and life insurance premiums.
Krishan Arora, partner, Grant Thornton Bharat, said the GoM’s proposal appears to be aimed at compensating for potential revenue shortfalls from reduced rates on common-use items and exemptions to health and life insurance premiums. “By rationalising rates, the GoM’s strategy appears to seek a revenue-neutral position,” he said.
The GoM on rate rationalisation, a six-member panel, has finalised its recommendations for rate changes for about 150 items. According to sources, it has suggested a 35% special GST on tobacco, tobacco products and aerated beverages. It has also suggested increasing tax rates on ready-made garments, luxury watches and shoes, and cutting rates on packaged water, stationary items, etc.
