GST hike
The Goods and Services Tax (GST) Council is set to consider introducing a special 35% tax rate on demerit or “sin” goods, such as cigarettes, tobacco, and aerated beverages. This would represent a significant change in the GST structure, which has remained largely consistent since its launch seven years ago.
Key recommendation
35% GST on Sin Goods: The proposal suggests raising the GST rate on sin goods from the current maximum of 28% to 35%, aiming to recover revenue losses from potential rate reductions on essential items.
Updated GST on Garments:
5% on garments priced up to ₹1,500.
18% on garments priced between ₹1,500 and ₹10,000.
28% on garments priced above ₹10,000.
Focus on High-End Products: Higher tax rates have been proposed for luxury items, including cosmetics, watches, and footwear, targeting higher tax contributions from premium purchases.
GST Structure to Stay Intact
The existing GST rate slabs—5%, 12%, 18%, and 28%—will remain unchanged for now, providing stability in the overall tax framework.
The meeting will also discuss changes in GST for insurance premiums:
- Health Insurance: Possible exemption for senior citizens and for coverage up to ₹5 lakh for all policyholders. Premiums for higher coverage may remain taxed at 18%.
- Life Insurance: Exemptions could be extended to term life insurance premiums.
Significance and Implications
The suggested changes aim to balance revenue needs with affordability, applying higher taxes to luxury and sin goods while reducing the burden on essential items. The outcome of the December 21 GST Council meeting will influence businesses and consumers, potentially reshaping the indirect tax landscape in India.
