-
-

GST Council to Decide on Major Tax Hikes on December 21

By
Play / Stop Audio
Progress

The Goods and Services Tax (GST) Council is slated to convene its 55th meeting on December 21, 2024, in Jaisalmer, Rajasthan. A significant agenda item is the proposed increase in GST rates on products like cigarettes, tobacco, and aerated beverages from the current 28% to 35%. This recommendation comes from the Group of Ministers (GoM) on Rate Rationalisation, aiming to curb consumption of these "sin goods" and compensate for potential revenue losses from anticipated tax reductions on essential items.

Proposed GST Rate Adjustments:

  • Sin Goods: The GoM suggests elevating the GST rate on cigarettes, tobacco products, and aerated drinks to 35%. This move is intended to deter consumption and address health concerns associated with these products.
  • Textiles: A tiered GST structure is proposed for readymade garments:
    • 5% for items priced up to ₹1,500.
    • 18% for those between ₹1,500 and ₹10,000.
    • 28% for garments exceeding ₹10,000. This stratification aims to balance affordability for consumers and revenue generation.
  • Essential Items: The GoM recommends reducing GST rates on commonly used goods such as bicycles and exercise books to make them more accessible to the general public.

Impact on Industries and Consumers:

The proposed tax hike on sin goods has already influenced market dynamics. Shares of companies like ITC, Godfrey Phillips, and VST Industries experienced declines of up to 3% following the announcement. Similarly, Varun Beverages, a major player in the aerated drinks sector, saw its stock price dip in response to the proposed 35% GST rate on aerated beverages.

For consumers, these adjustments could lead to increased prices for products like cigarettes and soft drinks, potentially reducing their consumption. Conversely, essential items such as bicycles and exercise books may become more affordable if the proposed rate cuts are implemented.

Additional Agenda Items:

The Council is also expected to discuss the inclusion of natural gas under the GST regime. Currently, natural gas is subject to a fragmented tax structure, with both central excise duties and state-imposed value-added taxes (VAT). Bringing natural gas under GST could streamline taxation and benefit industries reliant on this resource.

Another critical topic is the potential reduction of GST rates on health and life insurance premiums, particularly for senior citizens. The aim is to enhance the affordability and accessibility of insurance products, thereby increasing insurance penetration across the country.

The outcomes of the 55th GST Council meeting will have far-reaching implications for various sectors and consumer pricing. The proposed rate changes reflect the government's strategy to balance revenue generation with public health objectives and economic growth.

Comments