Two-day GST Council meeting begins: Rate cuts to slab rationalisation; Here's what to expect

The Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising ministers from all states will discuss the Centre's 'next-gen' GST reform proposal of having just two tax rates of 5 and 18 per cent by moving products from the current 12 and 28 per cent slab to lower rates in a two-day meeting starting Wednesday.

Here we take a look at things to expect from the GST meeting:

GoM consents to Centre's proposals

The Group of Ministers (GoM) has consented to Centre's proposal of doing away with the 12 and 28 per cent slabs, and reducing tax rates to benefit common man.

GoM on electric vehicles

The GoM has favoured charging electric vehicles priced up to Rs 40 lakh with an 18 per cent GST, PTI reported. The Centre, however, is keen to push EV adoption and favours a 5 per cent rate and the same stance will be pushed in the Council meeting, it also said.

GoM on health/life insurance

The GoM has proposed exempting tax on health and life insurance premiums for individuals, as per Reuters.

GST rebate for regular food items

Most of the common use food items like ghee, nuts, drinking water (20 litre), non-aerated drinks, namkeen; certain footwear and apparels; medicines and medical devices are likely to move from 12 per cent to 5 per cent tax slab. Common use items ranging from pencils, bicycles, umbrellas to hair pins may also move to 5 per cent slab.

Price of electronic items likely to fall

Prices of electronic items like certain category of TV, washing machine and refrigerator are likely fall because of being taxed at a lower rate of 18 per cent, as against 28 per cent currently.

Differential rates for automobiles

Goods like automobiles that are currently charged at the highest slab of 28 per cent, plus a compensation cess, may see a differential rates with entry level cars being charged 18 per cent rate, while SUVs and luxury ones being put in the special 40 per cent rate.

Cost cut likely for some motorcycles

The government has also proposed cutting the tax on motorcycles and scooters with an engine capacity of less than 350cc, which mainly includes commuter vehicles and covers 95 per cent of close to 20 million two-wheelers sold in India last fiscal year by companies including Bajaj Auto, Hero MotoCorp and TVS Motor.

40% rate for demerit goods

The special 40 per cent rate will also be for other demerit goods like tobacco, pan masala and cigarretes. There could also be an additional tax on top of this rate for this category.

Oppn-ruled states demand compensation

Eight opposition-ruled states -- Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal — have also demanded that all states be compensated for the revenue loss they incur post the implementation of the GST rejig. These states are likely to meet ahead of the GST Council meeting on September 3 to formalise their strategy on the issue.

Most items in 12% slab likely to move to 5%

Around 99% of items in the 12 per cent slabs are likely to move to 5 per cent slab, while 90 per cent of goods and services under the 28 per cent rate will shift to 18 per cent.

With PTI, Reuters inputs