GST Council Proposes Rate Cuts and Rationalization to Boost Economy and Consumer Demand
The GST Council is considering a new paradigm of indirect tax regimes involving fewer rates and rationalized structures. A Group of Ministers (GoM) was constituted to look into these changes, aiming to simplify the existing multiple-rate structure (0%, 5%, 12%, 18%, 28%). Key proposals include reducing GST on health and life insurance, cancer drugs, and certain consumer goods to boost demand. While some sectors like healthcare and renewable energy welcome these moves, others like the textile and insurance industries have expressed concerns regarding input tax credits and increased costs. The removal of the compensation cess is also a major point of discussion.
Key Points
- The rationalization process aims to reduce the complexity of the current GST structure and nudge economic growth.
- Proposed cuts include reducing GST on cancer drugs and potentially exempting certain insurance premiums.
- The compensation cess, currently levied on luxury and 'sin' goods, is slated to expire or be restructured.
- The revenue implication of these changes is estimated to be significant, with some estimates suggesting a hit of ₹48,000 crore.
Exam Facts
- The GST Council is a constitutional body under Article 279A.
- The current main GST rates are 0%, 5%, 12%, 18%, and 28%.
- The GoM on rate rationalization was first constituted in September 2021.
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