Major GST reset on the cards? Council mulls scrapping 12% slab, lowering tax on insurance,
The GST Council is set to meet soon for what could be one of the most significant reviews of the Goods and Services Tax regime since its launch eight years ago.
According to a TOI report, high on the agenda is a sweeping reassessment of tax rates on consumer goods and a proposal to trim the burden on products like air conditioners, which are currently taxed at the highest slab.
Compensation cess strategy
Another critical issue is the compensation cess—a pool of funds the Centre has been releasing to states to offset GST-related revenue losses.
With this arrangement ending in March, TOI reported that the Council is expected to draft plans to maintain revenue streams, possibly by continuing to levy additional cess on products such as tobacco and other “sin goods.”
States remain apprehensive about potential revenue shortfalls if the cess disappears without an alternative. This fear has often made them reluctant to approve any tax reductions, even when such cuts are considered beneficial to consumers.
Relief likely for insurance policies
Among the proposals is a move to eliminate GST on pure term insurance policies altogether, shifting them from the current 18% rate to a zero-tax bracket, the news outlet noted.
While the life insurance industry has argued for reducing the tax to 12%, the Centre appears inclined to go further to support middle-class buyers.
Health insurance may also see some relief, though no final call has been made yet.
