GST Update: New Tax Rates, Slabs Expected to Take Effect by Sept 22
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India’s indirect tax system is on the cusp of a major reform. The high-powered GST Council , headed by Union Finance Minister Nirmala Sitharaman, will meet on September 3-4 in New Delhi to deliberate on a shift to a two-slab GST structure , replacing the existing four-tier regime.
Currently, GST is levied at 5%, 12%, 18% and 28%. The reform proposal seeks to collapse these into 5% and 18%, with goods and services classified as ‘merit’ or ‘standard’. However, a special 40% rate will remain for ultra-luxury cars and sin goods such as tobacco.
The upcoming meeting will also consider recommendations from three Group of Ministers (GoMs) on rate rationalisation, compensation cess, and GST treatment of health and life insurance. One significant proposal under discussion is to exempt GST on individual health and life insurance premiums, which are currently taxed at 18%.
The two-slab idea has already received in-principle support from a six-member GoM led by state minister Choudhary, who confirmed that“We have supported the two proposals by the Government of India, of scrapping GST slabs of 12% and 28%.” However, he also noted that some states raised concerns, which will now be taken up by the full Council.
If approved, the rollout of the new tax rates is expected by September 22, just ahead of the Navratri festive season. According to reports, formal notifications would be issued five to seven days after the Council’s decision.
Industry players are keeping a close eye on developments. The Federation of Automobile Dealers Association (FADA) has written to the Finance, Commerce, and Heavy Industries ministries, urging early implementation. It cautioned that customers are postponing car purchases in anticipation of rate cuts, which could result in weak sales during the festive season if the reforms are delayed.
The GST Council, which includes finance ministers of all states and Union Territories along with the Centre, serves as the apex body for indirect tax policy in the country. Its decision on rate restructuring could mark one of the most significant steps in simplifying India’s tax system since GST was first introduced.
Currently, GST is levied at 5%, 12%, 18% and 28%. The reform proposal seeks to collapse these into 5% and 18%, with goods and services classified as ‘merit’ or ‘standard’. However, a special 40% rate will remain for ultra-luxury cars and sin goods such as tobacco.
The upcoming meeting will also consider recommendations from three Group of Ministers (GoMs) on rate rationalisation, compensation cess, and GST treatment of health and life insurance. One significant proposal under discussion is to exempt GST on individual health and life insurance premiums, which are currently taxed at 18%.
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The two-slab idea has already received in-principle support from a six-member GoM led by state minister Choudhary, who confirmed that“We have supported the two proposals by the Government of India, of scrapping GST slabs of 12% and 28%.” However, he also noted that some states raised concerns, which will now be taken up by the full Council.
If approved, the rollout of the new tax rates is expected by September 22, just ahead of the Navratri festive season. According to reports, formal notifications would be issued five to seven days after the Council’s decision.
Industry players are keeping a close eye on developments. The Federation of Automobile Dealers Association (FADA) has written to the Finance, Commerce, and Heavy Industries ministries, urging early implementation. It cautioned that customers are postponing car purchases in anticipation of rate cuts, which could result in weak sales during the festive season if the reforms are delayed.
The GST Council, which includes finance ministers of all states and Union Territories along with the Centre, serves as the apex body for indirect tax policy in the country. Its decision on rate restructuring could mark one of the most significant steps in simplifying India’s tax system since GST was first introduced.
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