NEXT GENERATION  GST

Latest Update : 

HISTORIC  GST MEETING HELD 

INDIVIDUAL LIFE & HEALTH INSURANCE EXEMPTED  FROM GST , 

MANY HOUSEHOLD GOODS TO BECOME CHEAPER

Dated 04.09.2025 : A historic GST Council meeting, the 56th since its inception, was held yesterday. It brought about a major overhaul of the Goods and Services Tax regime. The key decisions taken are:

1. GST Rate Rationalization:

• Two-Slab System: The Council approved a move from the current four-slab structure (5%, 12%, 18%, and 28%) to a new two-slab system of 5% and 18%. This is aimed at simplifying the tax structure and making it easier for businesses to comply.
• 40% Special Rate: A new, higher tax slab of 40% was created for a select list of luxury and “sin” goods. This is in addition to the two main slabs.

2. Impact on Goods and Services:

• Cheaper Items (Moved to 5%): A wide range of daily-use items, including consumer goods, food products, and essential household items, will now be taxed at 5%. This includes:
  • Soaps, hair oil, shampoos, and toothpaste (previously 18%).
  • Packaged food items like biscuits, namkeen, coffee, and condensed milk.
  • Bicycles, kitchenware, and other small household goods.
• Cheaper Items (Moved to 18%): Many aspirational and consumer durable goods that were previously in the 28% slab will now be taxed at 18%, making them more affordable. These include:
  • Air conditioners, refrigerators, televisions, and washing machines.
  • Cement.
  • Small cars (petrol cars up to 1,200 cc and diesel cars up to 1,500 cc) and motorcycles up to 350 cc.
• Tax Exemptions (0%):
  • Insurance: A landmark decision was to completely exempt individual life and health insurance premiums from GST. This is a significant relief for policyholders and is expected to increase insurance penetration in the country.
  • Food: Items like rotis, parathas, and ultra-high-temperature milk will now have a Nil GST rate, down from 5%.
  • Healthcare: Several life-saving drugs and medicines for conditions like cancer have also been brought to a zero GST rate.
• More Expensive Items (Moved to 40%): A new 40% tax slab will be applied to certain luxury and “sin” goods, including:
  • Luxury cars above a certain engine capacity and length.
  • Tobacco products, cigarettes, and pan masala.
  • Aerated beverages with added sugar.

3. Implementation:

• The new GST rates are expected to come into effect from September 22, 2025.

Finance Minister Nirmala Sitharaman stated that the decisions were unanimous and were aimed at benefiting the common man, strengthening labor-intensive industries, and simplifying the tax regime.

Who attended the meeting ? 

The GST Council is a constitutional body in India comprising a mix of central and state government representatives. The 56th GST Council meeting was attended by the following individuals and their representatives:

• Union Finance Minister Nirmala Sitharaman: She is the Chairperson of the GST Council.
• Union Minister of State for Finance Pankaj Chaudhary: He is also a member of the council.
• Finance Ministers of all States and Union Territories with a Legislature: Each state is represented by its Finance Minister or an official nominated by the state government. For example, Bihar’s Deputy Chief Minister and Finance Minister, Samrat Choudhary, and Odisha’s Chief Minister, Mohan Charan Majhi, attended the meeting.

The meeting is known for its cooperative federalism, where all decisions are taken through a consensus-based approach after deliberation among all the members. Several state finance ministers, including those from opposition-ruled states, were present and actively participated in the discussions.

What are GOM  Recommendations on GST ON Goods ? 

GST RECOMMENDED  ON  MERIT GOODS AND  STANDARD GOODS

It’s reported  that the GoM has accepted the Centre’s proposal to reduce the current four-slab structure (5%, 12%, 18%, and 28%) to a two-slab system.  The new slabs are recommended to be 5% for ‘merit goods’ and 18% for ‘standard goods’.

What comes under “  Merit Goods “? 

When a GoM or government body talks about “merit goods,” they are referring to a broad economic concept rather than a fixed, pre-published list. Merit goods are those that are considered beneficial for society as a whole and that the government wants to encourage the consumption of.

However, based on the specific recommendations made by the GoM on rate rationalization, we can infer which goods are likely to be classified as “merit goods” and, therefore, be placed in the proposed 5% GST slab. The key principle is to move items of mass consumption and those that are essential for the common person’s daily life from higher tax brackets to the lowest one.

Here is a general list of the types of goods and services that are being talked about for the 5% GST slab, based on media reports and the GoM’s proposals:

• Food Items: Most pre-packaged and labelled food products, including items like condensed milk, dried fruits, frozen vegetables, and various cereals and flours.
• Essential Household Items: Products that are currently in the 12% slab and are used by a large section of the population, such as sewing machines, certain types of umbrellas, and possibly some small consumer goods.
• Healthcare and Agriculture: Goods related to health, such as certain life-saving drugs, and agricultural inputs like fertilizers and farm machinery are expected to see tax cuts, with many moving to the 5% slab.
• Services: The most significant talk is about a potential reduction or even full exemption on health and life insurance premiums, particularly for individuals, which is a major move that would make these services more affordable.

Movement of Items:

• From 12% to 5%: The GoM recommends that nearly 99% of the items currently in the 12% bracket be moved to the lower 5% slab. This includes a wide range of daily-use items.
• From 28% to 18%: It has also been recommended that about 90% of goods and services currently taxed at 28% be shifted to the 18% slab. This would make many consumer durables and aspirational goods cheaper.

Special High Rate: A special, higher tax rate of 40% is proposed for a small list of “sin goods” and ultra-luxury items, such as tobacco products and luxury cars. Some states have even suggested an additional levy on top of the 40% rate to maintain the current tax incidence on these items.

GOM RECOMMENDS GST EXEMPTION FOR INDIVIDUAL INSURANCE

Dated 21.08.2025 : A Group of Ministers (GoM) on Goods and Services Tax has formally proposed to the GST Council that premiums for individual health and life insurance policies be completely exempted from GST. This is a major development in the ongoing “next-generation” GST reforms.

Here are the key points from the recent discussions:

• Proposal for Exemption: The Centre has proposed and the GoM has largely agreed to a zero-GST rate on individual life and health insurance premiums. This is a direct response to the long-standing demand to make insurance more affordable for the common person, especially for senior citizens and low-income families.

• Revenue Impact: The move is estimated to result in an annual revenue loss of approximately ₹9,700 crore for the states. Some states have expressed reservations due to this potential revenue shortfall, but they have largely supported the principle of making insurance more accessible.

• The Input Tax Credit (ITC) Issue: This is a crucial and complex aspect of the proposal. If insurance services are classified as “exempt” from GST, insurers would lose the ability to claim Input Tax Credit (ITC) on the GST they pay for their operational expenses (e.g., technology, distribution, and other services). This could potentially lead to an increase in their operational costs, which they might pass on to consumers by hiking the base premium.

• Passing on the Benefit: Many states have emphasized the need for a mechanism to ensure that the full benefit of the GST exemption is passed on to the policyholders and does not get absorbed by the insurance companies.

• Next Steps: The GoM’s report, which includes these recommendations and the concerns raised by various states, will be presented to the GST Council. The Council will then take the final decision in its upcoming meeting, which is expected to be held in August 2025.

This development is being widely seen as a positive step toward financial inclusion and a significant part of the government’s promise to simplify the GST regime and provide relief to citizens.

What is the Next Generation GST Reform?
Will Senior Citizens Get Exemption on Insurance in the Next Generation GST ?

16.08.2025 : In his Independence Day speech on August 15, 2025, Prime Minister Narendra Modi announced “next-generation” Goods and Services Tax (GST) reforms. He stated that these reforms would be a “Diwali gift” to the country, reducing the tax burden on the common man, small businesses, and MSMEs.

The Next Generation GST aims to simplify slabs and reduce costs.
Media speculation suggests the Next Generation GST reforms could exempt senior citizens from paying GST on health insurance.
If approved, the Next Generation GST Council decision may reduce insurance premiums.

Key points from his announcement and subsequent details from the Ministry of Finance include:

• • Tax reduction: The reforms are aimed at making everyday-use items and aspirational goods more affordable by reducing taxes.

• • Simplified structure: The government proposes to replace the existing multiple GST slabs (5%, 12%, 18%, and 28%) with a simplified two-slab structure:
    

     

    • • A “merit” rate, likely 5%, for essential goods.
    • • A “standard” rate, likely 18%, for most other goods and services.

• • Special rates: A special rate, possibly 40%, would be applied to a select few luxury and “sin” goods.

• • Timeline: The reforms are expected to be implemented by Diwali 2025, with the GST Council deliberating on the proposals in the coming weeks.

• • Benefits: The changes are intended to boost consumption, simplify compliance, and provide long-term clarity on rates for businesses.

MEDIA SPECULATION : Following Prime Minister Modi’s announcement of “next-generation” GST reforms, media outlets are speculating on which specific products and sectors will benefit from the tax rate rationalization. The consensus is that the government’s plan to simplify the four-slab structure (5%, 12%, 18%, and 28%) to a two-slab system (likely 5% and 18%) will lead to significant tax reductions on a wide range of consumer goods. 

Here’s a summary of the media speculation on specific product categories:

• • Items moving from 12% to 5%: Media reports suggest that a large number of mass-use items currently taxed at 12% will be shifted to the lower 5% bracket. This includes products like condensed milk, dried fruits, frozen vegetables, pasta, jams, and various food items and daily essentials. This change is expected to make these goods more affordable for the common man.

• • Items moving from 28% to 18%: It is widely reported that about 90% of the items currently in the highest 28% bracket, which includes many aspirational and consumer durables, will be moved to the 18% slab. This could lead to a reduction in prices for goods such as air conditioners, refrigerators, washing machines, and television sets.

• • Special rates: The existing special rates for certain industries are expected to be retained. For instance, the 0.25% rate on diamonds and precious stones and the 3% rate on jewelry are likely to remain unchanged.

• • Services: There is also speculation about a GST reduction on services, particularly health and term insurance, which are currently taxed at 18%. This has been a long-standing demand and could be a significant relief for consumers.

• • Luxury and ‘Sin’ Goods: A new, high-tax slab, possibly at 40%, is being discussed for a few luxury and “sin” goods that currently attract a compensation cess. This is intended to ensure that the tax burden on items like tobacco and luxury cars remains high.

• • Inverted Duty Structure: The media is also highlighting that the reforms will correct the inverted duty structure in key sectors like textiles, footwear, and fertilizers, which is expected to boost domestic manufacturing and exports.

• • It is important to note that these are media speculations based on government sources and expert opinions. The final list of products and services and their new GST rates will be decided by the GST Council, which is expected to meet in the coming weeks to finalize the proposals.

When is the next GST council meeting ?

While no official date has been announced by the government, it is anticipated to be held after the conclusion of the Monsoon Session of Parliament.

This meeting is considered highly crucial as it is where the “next-generation” GST reforms, including the proposed rationalization of tax slabs, will be deliberated and finalized. The agenda is also expected to include discussions on the implementation of decriminalization measures and clarifications on the GST Appellate Tribunal rules.

GST   ON   INSURANCE OF SENIOR CITIZENS : 

 There is significant discussion and speculation about a reduction in GST on insurance, with a particular focus on senior citizens. The issue has been a long-standing demand and a key topic of discussion for the GST Council.

• • Tax on Insurance: Currently, most health and life insurance premiums attract an 18% GST, which is considered a significant burden, especially for senior citizens who already pay higher premiums due to their age and health conditions.

• • Proposed Relief: A Group of Ministers (GoM) has been examining the issue and has proposed a reduction or even a complete exemption of GST on insurance premiums, particularly for:
    

     

    • • Health insurance policies for senior citizens.
    • • Term life insurance policies.
    • • Health insurance policies with a sum insured up to a certain threshold (e.g., ₹5 lakh).

• • Expected Benefits: A GST reduction is expected to make insurance more affordable, thereby increasing its penetration in India. This is seen as a crucial step towards the government’s goal of “Insurance for All.” For senior citizens, it would provide much-needed financial relief and help them better manage their healthcare costs.

• • GST Council’s Role: The proposals from the GoM are on the agenda for the upcoming GST Council meeting. The final decision rests with the Council, which will weigh the potential benefits of increased insurance coverage against the possible revenue loss for the government.

The media is speculating that this could be a major part of the “next-generation GST reforms” that the Prime Minister announced, and a positive decision on this matter would be a significant “Diwali gift” for senior citizens and the middle class.
Ministry of Finance

GST Council Updates

Press Information Bureau (PIB)

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