GoM reviewed GST exemption on health and life insurance premiums; states supported it but urged strict monitoring, with an estimated ₹9,700 crore annual cost
New Delhi
The Group of Ministers (GoM) on GST rate rationalisation has accepted the Centre’s proposal to cut the number of tax slabs, moving India closer to a simpler two-rate structure. The final decision will be taken by the GST Council in its September meeting.
Currently, GST is levied at four main rates—5, 12, 18, and 28 percent. The new plan suggests only two slabs: 5 percent for essential “merit” goods and services, and 18 percent for most other items. A higher 40 percent “sin tax” will continue for products like alcohol, tobacco, gambling, fast food, coffee, sugar, and soft drinks, aimed at discouraging harmful consumption.
Finance Minister Nirmala Sitharaman, addressing the GoM led by Bihar Deputy Chief Minister Samrat Choudhary, said a simplified tax regime would benefit the common man, farmers, small businesses, and the middle class while making GST more transparent.
Under the revised structure, nearly all items currently taxed at 12 percent will shift to 5 percent, while most in the 28 percent category will move to 18 percent. The Centre expects this rationalisation to improve compliance, reduce disputes, and simplify the system for taxpayers.
The GoM also reviewed the Centre’s proposal to exempt GST on individual health and life insurance premiums. While most states supported the relief measure, they stressed the need for strict monitoring to ensure insurance firms pass on the benefits to policyholders. The exemption could cost the exchequer around ₹9,700 crore annually.
If approved next month, the reform would mark the biggest change in GST since its rollout in 2017, significantly easing the tax burden for consumers and businesses.
