The ministerial level committee formed to rationalize GST rates can provide a huge relief to consumers. GST rates of several medicines, insurance and tractors are expected to go down to 5% by next month.
Currently, tractors attract 12% or 28% GST, depending on their classification. The reduced revenue from tractors can be compensated by increasing the GST rate on expensive electric vehicles (EVs).
There is also a possibility of reduction in GST rates on health and term insurance. GST on health insurance can be reduced from 18% to 12%, while term insurance is expected to attract 5% GST.
Though the demand for zero GST on term insurance has been rising for some time, this may lead to loss of input tax credit to insurance companies. Hence, the proposal of 5% GST on term insurance is considered appropriate.
According to a report in the Times of India, the ministerial level committee is not in favor of changing the four rates of GST to three. However, it may reduce the number of items which attract 12% GST. While some items may be placed in 5% slab, others can be shifted to the 18% slab.
The committee will come out with its recommendations by the end of October. A meeting will be held on October 19 to discuss GST rates on insurance. On October 20, another meeting has been scheduled for item-specific discussion on rate rationalization.
While many state finance ministers have agreed to the three slab structure, states like Kerala, Karnataka and West Bengal are in favour of maintaining the current rates.
According to reports, Kerala Finance Minister K N Balagopal is hesitant about reducing the GST rates owing to the state’s weak financial condition.
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