Nomura hints 12% slab may go – Price drop for ACs, tractors & insurance?
Recent reports in the media and the buzz in the market indicate that the GST Council meeting is likely in the next two weeks. Rate rationalisation is one of the key agendas. Despite multiple rounds of discussions, from the 45th GST Council meeting in 2021 to the recent 55th meeting in December 2024, a consensus on it has remained elusive
GST rates across categories are likely to be reviewed with a focus on reducing taxes on some of them. As per available reports, the council may consider
-Removing the 12% slab and shifting some items to the 5% or 18% slabs.
-Govt may consider proposal to abolish current 18% GST on pure term insurance plans
-Govt may look at reducing the 28% tax slab on products like air conditioners.
GST roadmap: Tackling ‘Compensation Cess’
That apart, the compensation cess, levied to offset state revenue losses after GST implementation, is set to expire in March next year. There is a buzz that the cess might be replaced with two new levies – a Health Cess and a Clean Energy Cess.
In terms of the Compensation Cess relevant for large cars and SUVs, Key international brokerage house, Nomura pointed out that they do not expect any reduction in taxation post the expiry of the compensation cess. We estimate it may continue to be charged under other heads like Clean Energy Cess. However, the mechanism of sharing with states will change, and they will need their approval for this to happen.”
Nomura on GST Council meeting expectations
Nomura believes that the “removal of the 12% slab may benefit tractors and ACs, amongst other items.” Tractors fall in the 12% tax slab. According to Nomura, if this slab is removed, “it is more likely that tractors may be moved to the 5% slab rate.” This would make tractors relatively more “affordable and benefit demand. Moreover, the upcoming stricter emission norms (TREM-IV) should help companies absorb the incremental cost as well,” added Nomura.
