Prices of automobiles, four-wheelers and two-wheelers, fast moving consumer goods, insurance premium for health and life insurance, cement, and a plethora of other items are set to become cheaper, boosting consumption in the economy, as the GST Council is all set to begin its much-awaited two-day deliberations tomorrow.

In his Independence Day speech, Prime Minister Narendra Modi announced next generation reforms in GST and lowering of the taxes by Diwali this year.

The Finance Ministry’s suggestions for two rate GST structure of 5% and 18% have already been approved by the empowered group of ministers (EGOM) under the GST Council. The government has also suggested an additional rate of 40%, comprising only five to seven sin goods.

 “There are two standard rates and two rates at the extreme end on both the sides. On one side is less than 5 percent for all the job creating sectors, and the other extreme is of 40% for all the sin goods,” said a government source.

Sources point out that a massive relief is on cards on insurance premiums. The EGOM is largely in favour of exempting insurance premiums (health and term life plans) from the GST, which are currently under the 18% slab. The move will come as a major reprieve for the common man, reeling under high insurance premium costs over the last couple of years.

Consumers are awaiting car and two-wheeler price cuts. The Finance Ministry proposals have recommended lowering GST on small cars and two wheelers to 18% from the current slab of 28%, according to sources. The move will come as a major reprieve to the automobile industry, which has been witnessing a slowdown for the last one year.

“GST on small petrol cars less than four meters in length and having engine capacity of less than 1,200 cc has been recommended to be brought down to 18% from the current 28%. Also, GST on two wheelers with engine capacity of less than 350 cc has been proposed to be lowered to 18% from 28% currently,” said a source.

It may be noted that the total tax on small petrol cars less than four meters in length and having engine capacity of less than 1200 cc is 29%, including 1% cess. That entails GST reduction of total 11% on small cars.

A mega dole is on cards for the farm sector. GST on tractors is also likely to come down and other farm equipment are likely to witness major reduction, say sources. “As far as the tractors are concerned, the government has proposed to move them to the 5% slab from the current 12% slab. A number of other farm equipment may also be shifted to the lower slab of 5,” said the source.

Prices of common use goods such as namkeens, bhujia, snacks, noodles, butter, ghee, among others are likely to become cheaper once the proposal by the ministry for two rate GST structure -- 5% and 18% -- is approved by the GST Council. “All essential daily use commodities related to food, education, consumed by the common man will come under nil or 5% GST slab,” said government sources.