GST cut: Major plan on agenda for all food, textile items

The Goods and Services Tax ( GST) Council is set to convene on September 3 and 4, with a significant agenda focused on reducing tax levies on a variety of goods and services. According to a report by the Times of India, all food and textile goods could be in for a blanket shift to the 5% slab -- which means all classification concerns over type of goods could come to an end.

Among the proposed changes are substantial cuts to the GST rates on essential items such as cement and individual life and health insurance plans, which aim to alleviate financial burdens for consumers and streamline the tax structure.

One of the most notable proposals involves slashing the GST on cement from the current rate of 28% to a more manageable 18%. This adjustment has been long awaited by stakeholders in the construction and infrastructure sectors, where cement is a fundamental material.

The reduction is expected to lower costs for consumers, provided that manufacturers pass the tax savings onto buyers, amid past concerns regarding potential cartelisation in the industry.

In addition to cement, the Council is also considering lowering GST rates on mass-consumption services, including salon and beauty parlour services. Currently, mid to high-end salons are subject to an 18% tax, which is ultimately borne by customers. The proposed change aims to reduce this rate to 5%, making such services more affordable for a broader demographic.

Moreover, the GST Council is evaluating a significant shift in how individual insurance products are taxed. Under the new proposal, GST on term assurance and health insurance policies purchased by individuals would be set to zero.

This move is intended to encourage greater uptake of essential health coverage, thereby enhancing the overall insurance penetration in the country, ToI's report (by Sidhartha) said.

The Council, chaired by Union Finance Minister Nirmala Sitharaman, is also set to discuss a comprehensive restructuring of the GST system. This includes a proposal to consolidate the various tax slabs into simpler categories: 5% and 18% for most goods and services, while maintaining a 40% levy on certain sin and luxury items. This initiative is part of a broader effort to simplify the tax regime, reducing confusion over classifications and thresholds.

While some states, such as West Bengal, have suggested that the ceiling for GST should be increased beyond 40%, officials have expressed concerns that such a move could send the wrong signal and necessitate significant legal amendments. Instead, the current focus remains on creating a more straightforward tax environment that benefits both consumers and the government.

The Council's meeting next month comes after eight years of GST implementation, during which time officials have acknowledged the need to reassess the tax structure to ensure it remains revenue-neutral while balancing the interests of consumers.