All food and textile items may be moved into 5% GST slab

NEW DELHI: The GST Council will discuss a plan to slash levies on a host of products including cement, mass-consumption services such as salon and beauty parlours as well as individual life and health insurance plans when it meets early next month.

Also on the agenda will be a proposal to move all food and textiles products into the 5% slab as part of a move to simplify the tax regime and end all classification concerns, sources told TOI.

The levy on cement is proposed to be reduced from 28% to 18%, sources said, in what will address a long pending demand from the construction and infrastructure sectors with the building material being a key input. The move is expected to reduce costs for the end consumers, provided the industry, which has often faced cartelisation charges, passes on the benefit of lower taxes.

"Govt does not want to put in thresholds and other classification to ensure that there is as little confusion or interpretation," said a source.

Govt is also evaluating if levies on some of the commonly used services can be lowered from 18% to 5%. While the small salons are exempt, the mid and higher-end ones face 18% GST which is ultimately borne by consumers.

Similarly, in case of term assurance and health insurance policies purchased by individuals, GST will be zero - a move that is expected to not just ensure critical cover but also increase penetration of the service to cover a larger share of the population.

The GST Council, headed by Union finance minister Nirmala Sitharaman, with all states as members, is due to meet on Sept 3 and 4 to decide on a shift to fewer slabs - 5% and 18% for most goods and services, and 40% for a handful of sin and luxury items.

While there have been suggestions from states such as West Bengal to increase the GST ceiling from 40%, sources said the move will send a wrong signal, apart from requiring major amendments to the law.

The Centre is of the view that small cars - with length up to 4 metres - will face 18% tax and the bigger ones will attract 40% levy, again lower than the current 50% (28% GST plus 22% cess).

"When GST was introduced, it was important to ensure that the rates remained revenue neutral, but based on eight years of experience, we have to move to a new simple regime that balances the interests of consumers as well as the exchequer," said an official.



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