GST Council Meeting Today: FM Nirmala Sitharaman To Chair 55th GST Meet; What Are Likely Changes?

The 55th meeting of the Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, is set to take place in Jaisalmer, Rajasthan, on Saturday. As a crucial event ahead of the Union Budget 2025, this meeting holds importance for shaping tax policies. Ministers and officials from the Centre and states will deliberate on critical issues, including potential tax reliefs and rate adjustments.

Key Agendas for the GST Council

Rate Cuts on Health and Life Insurance Premiums

One of the headline agendas for the GST Council is the proposed reduction in GST rates on term health and life insurance premiums. If approved, this move will exempt GST on term policies for senior citizens and family coverage, irrespective of the insured amount. Additionally, health insurance policies with a sum assured of up to Rs 5 lakh might also benefit from GST relief. However, while the proposal aims to make insurance more affordable, it could cost the national exchequer an estimated Rs 2,600 crore in revenue.

GST on Food Delivery Charges

Another critical issue is whether the 5% GST on food delivery charges, currently applicable to the total supply value, will be made retrospective from 2022. Food delivery platforms like Swiggy and Zomato have recently come under scrutiny, with Zomato receiving a notice for Rs 803 crore for non-payment of GST between 2019 and 2022.

While authorities assert that delivery charges should attract an 18% GST rate, companies argue that they are intermediaries and not direct service providers. Most delivery partners earn below Rs 20 lakh annually, exempting them from GST registration.

Rate Rationalization for Bottled Water, Notebooks & Bicycles
The Council is expected to announce a reduction in GST rates for certain essential items. Notable rate cuts under consideration include:
Packed Drinking Water: Reduction from 18% to 5% on 20-litre bottles.
Bicycles: Reduction from 18% to 5%.
Exercise Notebooks: Reduction from 18% to 5%.

Rate Hikes on Luxury & Used Items

To balance revenue losses from rate cuts, certain luxury and used items are likely to see GST increases:
Luxury Goods: Shoes priced above Rs 15,000 and wristwatches costing over Rs 25,000 may attract a GST rate of 28%, up from 18%.
Used Electric Vehicles (EVs): GST on used EVs may rise to 18% from the current 12%, as recommended by the Fitment Committee.
Small Diesel and Petrol Vehicles: GST rates for these vehicles could increase from 12% to 18%.
These hikes could affect consumer choices and market dynamics in the luxury and automobile segments.

Higher GST on Sin Goods

The Council may increase GST on sin goods such as cigarettes, tobacco products, and aerated beverages from the current 28% to 35%. This measure could generate additional revenue while aligning with public health goals.

Inclusion of Aviation Turbine Fuel (ATF) Under GST

One of the most debated topics on the agenda is the inclusion of aviation turbine fuel (ATF) under the GST framework. Currently, ATF is subject to an 11% central excise duty and varying slabs of Value Added Tax (VAT) across states. It also enjoys a 2% concession under the Regional Connectivity Scheme. Bringing ATF under GST would simplify the tax structure and potentially reduce costs for airlines. However, it remains to be seen if the Centre and states can reach a consensus on this issue.

Revenue Boost from Rate Revisions

The Council's rate rationalization exercise, involving nearly 150 items, is expected to generate an additional Rs 22,000 crore in revenue for the Centre. This is seen as a move to offset revenue losses from proposed exemptions and rate cuts.