The middle class may get significant relief at the GST council's upcoming meeting, likely this month. The council is considering lowering Goods and Services Tax (GST) rates on several products commonly used by middle—and low-income groups. At the same time, there is also a proposal to reduce taxes on expensive products like home appliances.
The 8-year-old structure is undergoing a comprehensive review. The review focuses on reducing the tax rate on consumer goods currently falling under the 12% GST slab. The 12% GST slab covers many essential items like butter, processed foods, mobile phones, fruit juices, pickles, coconut water, umbrellas, bicycles, toothpaste, footwear, and clothing that are widely used by the general public.
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The compensation cess will expire in March 2026. After GST was implemented, this cess was provided to states to compensate for revenue shortfalls. With the end of the compensation cess approaching, the central government is planning to impose a new cess on “sin goods” like tobacco to help offset potential revenue losses faced by the states.
According to the Times of India, the central government is in favour of completely abolishing the existing 18% GST on pure term insurance plans. However, insurers have proposed reducing it to 12%. The government believes eliminating this tax would provide direct relief to middle-class consumers. Additionally, taxes on health insurance are also expected to be reduced, although no final decision has been made yet.
Sources told TOI that the government is considering scrapping the 12% tax slab entirely. However, tax rates on products used for commercial purposes might be increased to help limit the revenue deficit.
The government believes that lowering tax rates could boost demand for products, potentially compensating for some of the revenue loss. According to a senior official, revenue collection should not be measured solely by tax rates; if lower rates drive higher consumption, the government could benefit in the long run.