Another expert said that while the reduction in GST rates of health insurance would lead to a reduction in costs for the common man, helping to promote the coverage of health insurance, however, it would lead to the insurance companies losing out on input tax credits to that extent and accordingly, the reduction in costs can be less than the amount of GST previously charged.

Further, Another expert said, the council is also expected to discuss GST rate rationalization based on recommendations from the Group of Ministers. “It is expected that rates may decrease for essential items and increase for luxury goods, leading to a balance of revenue needs with public welfare,” he added.

Read Also: GST: Apparel industry slams proposed GST hike

GST rates on luxury goods that may be discussed in the 55th GST Council meeting are as:

1. GST on shoes costing above Rs 15,000 from 18 per cent to 28 per cent, and

2. Wristwatches priced over Rs 25,000 from 18 per cent to 28 per cent

Further, on the lines of public welfare, an expert, said, “The Income Tax numbers and GST numbers are dichotomous it seems. While YTD Direct Tax Collections till 10th Nov’24 have grown by more than 15 per cent, the YTD GST collections in around that period have grown by only 9.3 per cent. This shows that while income levels are growing in India yet consumption is not aligned accordingly. It may also mean inequality of income in the country. Further the YTD GST collections growth is also below the budgeted growth and considering that nominal GDP growth is around 10.5 per cent, the buoyancy of GST collections is below one. This may require some food for thought for the GST Council as it meets on 21st December 2024 at its 55th Meeting.”

Read Also: Govt collects Rs 16,398 crore GST on health, life insurance in FY24

Another expert said, “The proposal to levy tax on some of the luxury items, such as watches or shoes costing above the specified value would help increase tax collection. However, it is hoped that similar to the practice followed for hotels, such tax rates would be linked to actual sale price and not MRP, to avoid complications in the cases where the products are sold at a price lower than the MRP.”

He also stated that while the proposal to levy GST on readymade garments in multiple slabs based on price would reduce the accumulation of ITC for the industry and improve working capital, it would increase the cost of garments for the end consumer.

Read Also: GSTAT to start operations by the end of FY25: Revenue Secy

Implications for businesses

The outcomes of the 55th GST Council Meeting, are expected to have far-reaching implications for businesses. Rate rationalisation could alter cost structures, compliance changes may reduce operational hurdles, and tribunal operationalisation would provide clarity and resolution to long-standing disputes. Stakeholders across industries will closely monitor developments, hoping for transformative measures that align with ease of doing business and fiscal stability.

This meeting has the potential to mark a significant turning point for GST reforms, setting the tone for both short-term adjustments and long-term policy clarity.

Read Also: Who needs to file GST annual return by December 31, 2024

Recommendations during 54th meeting of the GST Council

The GST Council recommended the Group of Ministers (GoM) on life and health insurance related GST with the existing GoM on Rate Rationalisation; to submit a report by the end of October 2024.

The GST Council also recommended formation of a GoM to study the future of compensation cess.

The GST Council recommended to exempt supply of research and development services by a Government Entity; or a research association, university, college or other institution notified u/s 35 of Income Tax Act using government or private grants

The GST Council recommended reduction in GST rates on cancer drugs – Trastuzumab Deruxtecan, Osimertinib and Durvalumab from 12 per cent to 5 per cent.

The GST Council recommended roll out of a pilot for B2C e-Invoicing.

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