Sources told CNBC-TV18 that the GoM, in its meeting today, decided to propose a 35% rate for aerated drinks, tobacco and tobacco products.
“The 35% rate will be over and above the existing four-slab structure of 5%, 12%, 18%, and 28%,” sources said.
According to sources, the GoM aims to offset potential revenue losses from rate reductions on common-use items and exemptions, as well as reductions on health and life insurance premiums, through the introduction of the 35% special rate.
The GoM report is likely to be discussed at the upcoming 55th GST Council meeting in Jaisalmer, where the Council will deliberate and decide whether to accept or reject the proposals.
Additionally, the GoM is likely to propose changes to the GST structure for readymade garments.
“The proposal is for garments priced up to ₹1,500 to attract 5% GST, those priced between ₹1,500 and ₹10,000 to attract 18%, and garments priced above ₹10,000 to attract 28%,” sources revealed.
The GoM is also expected to recommend increasing GST rates on items such as cosmetics, watches, shoes, and handbags.
“Items falling under the luxury category due to their price range should attract 28%, mid-price range items 18%, and lower-price range items 5% or 12%,” sources said.
Further proposals include reducing GST on 20-liter packaged drinking water from 18% to 5% and increasing GST on shoes priced above ₹15,000 per pair from 18% to 28%. Similarly, wristwatches priced above ₹25,000 may also see a hike from 18% to 28%.
“In total, the GoM proposes changes to the rates of over 148 items,” sources added. The GoM intends to provide relief to the common man and middle class by proposing reduced rates on daily-use and common-use items such as bottled water, bicycles, and exercise books.
The GoM on rate rationalisation is chaired by Bihar Deputy Chief Minister Samrat Choudhary. Its six-member panel includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Kerala Finance Minister KN Balagopal.
Another key proposal to be reviewed by the GST Council involves exemptions for health and life insurance premiums.
“The GoM on insurance is likely to propose exempting GST on pure term life insurance premiums, currently taxed at 18%. For health insurance premiums, the panel is expected to suggest exemptions for senior citizens and for non-senior citizens up to ₹5 lakh annual coverage. For coverage exceeding ₹5 lakh, the GST rate is proposed to be reduced from 18% to 5%,” sources stated.
Currently, all insurance premiums are taxed at 18%.
The 13-member GoM on health and life insurance is also chaired by Bihar Deputy Chief Minister Samrat Choudhary and includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana.
