Union Finance Minister Nirmala Sitharaman is set to engage in critical pre-Budget discussions with state finance ministers on December 21-22, along with the 55th GST Council meeting. The meetings, expected to take place in Rajasthan, will likely be held in either Jaisalmer or Jodhpur, according to official sources.
The upcoming Budget, scheduled to be unveiled on February 1, 2025, will see state finance ministers presenting their recommendations to Sitharaman during the pre-Budget session. The 55th GST Council meeting, slated for one of the two days, is anticipated to address pressing issues, including a potential reduction or exemption in GST on health and life insurance policies. This decision, long awaited, is expected to benefit various policyholders, especially senior citizens and individuals with coverage of up to Rs 5 lakh. However, premiums on policies above Rs 5 lakh are likely to retain an 18% GST rate.
Other proposed changes include rationalizing tax rates for commonly used goods. A panel of state ministers has recommended reducing GST on essential items, such as packaged drinking water (20 liters and above) and bicycles below Rs 10,000, from 12% to 5%. Additionally, exercise notebooks may see a tax reduction from 12% to 5%, enhancing affordability for daily essentials. However, luxury goods, including high-end wristwatches (over Rs 25,000) and shoes priced above Rs 15,000, could see a GST hike from 18% to 28%, as proposed by the Group of Ministers (GoM) on rate rationalization.
Samrat Chaudhary, Deputy Chief Minister of Bihar, heads the 13-member GoM on health and life insurance and a 6-member GoM on rate rationalization. In its last meeting on September 9, the GST Council instructed the GoM to finalize its report by October-end, examining potential revenue impacts. This exercise is expected to generate an additional revenue of approximately Rs 22,000 crore.
Currently, GST operates under a four-tier structure with rates at 5%, 12%, 18%, and 28%. Essential goods generally fall under lower slabs, while luxury and non-essential items attract the highest rates, alongside an additional cess. The need for GST rate restructuring has gained urgency as the average GST rate has fallen below the revenue-neutral level of 15.3%.
