GST council meeting begins: tax cuts on auto, cement, health and life insurance, and common use items on the anvil

The two-day GST Council meeting to discuss tax cuts on the majority of items has begun in New Delhi. Along with rate cuts, the Council will also discuss the three-pillar reforms proposal by the ministry aimed at structural changes and ease of doing business push.

The meeting will discuss a major tax rate rationalisation, thereby lowering the tax on the majority of items, including four-wheelers, two-wheelers, FMCG goods, and insurance premiums. The move is expected to come as a reprieve to the end consumer and is also likely to bolster consumption in the economy. 

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

Going forward, the tax on small petrol cars, which are less than four meters in length and have an engine capacity of less than 1200 cc, may be reduced to 18% from the current 28%. GST on two-wheelers with an engine capacity of less than 350 cc may be lowered to 18% from 28% currently.

Prices of goods used by the common man, such as namkeens, bhujia, snacks, noodles, butter, ghee, among others, are likely to become cheaper once the proposal by the Ministry of Finance for a two-rate GST structure—5% and 18%—is approved by the GST Council.

In a major fillip to the infrastructure and construction sector, GST on cement is likely to come down to 18%, compared with 28% now. If approved, it will provide a boost to the real estate, highways, and construction sectors.

A major relief is also expected on insurance premiums, which have become a bane for the common man due to exorbitantly high charges. The group of ministers under the GST Council is largely in favour of exempting insurance premiums (for health and term life plans) from GST, which are currently under the 18% slab.