GoM on rate rationalisation meets to discuss Centre’s plan for 5% and 18% GST regime

A panel of state finance ministers on Thursday began deliberations on the Centre’s proposal to streamline India’s Goods and Services Tax (GST) by cutting the number of tax slabs to two.

The six-member Group of Ministers (GoM), chaired by Bihar Deputy Chief Minister Samrat Choudhary, is examining a plan to reduce the four current GST slabs of 5%, 12%, 18% and 28% to two rates of 5% and 18%.

“The rate rationalisation will provide greater relief to the common man, farmers, the middle class and MSMEs, while ensuring a simplified, transparent and growth-oriented tax regime,” Finance Minister Nirmala Sitharaman told the panel on Wednesday.

Other members of the GoM include Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda and Kerala Finance Minister K N Balagopal.

The reform proposal comes alongside a separate recommendation to exempt GST on individual health and life insurance premiums, currently taxed at 18%. The move could cost the exchequer about ₹9,700 crore annually.

Speaking with reporters after the meeting of the GoM on health and life insurance, Choudhary said that all states have agreed to the Centre's proposal for a reduction in tax rate on individual life and health insurance policies, with some expressing reservations.

"The Centre's proposal is clear that individual insurance policies should be exempt from GST. This has been discussed by the GoM which will present its report to the Council. A final view on tax rates will be taken by the Council," he said.

The states also stressed that the GST Council should devise a mechanism to ensure that the GST cut benefits reach policyholders.

The GST Council, chaired by Sitharaman and comprising state finance ministers, is expected to take a final decision on the proposals at its next meeting in September. Another GoM chaired by Minister of State (finance) Pankaj Chaudhary discussed the future of the GST Compensation Cess, which is set to lapse on October 30, though no alternative mechanism was proposed.