Still Waiting on That GST Cut? FinMin rules out any Immediate Reduction of Tax Rates as Council awaits GoM Recommendation

The Ministry of Finance on Monday firmly ruled out any immediate reduction in Goods and Services Tax (GST) rates, ruling out any hopes of immediate tax relief for consumers. The clarification came in response to an unstarred question raised in the Lok Sabha by Samajwadi Party MP Ujjwal Raman Singh towards the Minister of State for Finance, Pankaj Chaudhary.

The Minister of State for Finance explained that GST rates are determined based on the recommendations of the GST Council, a constitutional body composed of representatives from the Centre and all States and Union Territories. The GST Council deliberates upon and provides recommendations for any changes that may be made to the various facets of the GST regime, including the applicable rates on goods and services.

Pankaj Chaudhary further clarified that the Council, in its 45th meeting held on September 17, 2021 had constituted a Group of Ministers (GoM) to examine GST rate rationalisation. However, the report from the GoM is still pending and has not been submitted to the Council.

The UAE Tax Law Is Evolving — Stay Ahead Before Clients Find Someone Who Already Is, Enroll Now

Given the absence of this report, the remaining parts of the query raised by the MO pertaining to the percentage of proposed GST reduction and the timeline for its implementation “do not arise”, said the Minister of State.

This clarification from the Finance Ministry comes at a bit of a turbulent moment as consumers and industry stakeholders have been eagerly anticipating tax relief, especially as inflation continues to pressure household budgets.

Stakeholders remain hopeful that a restructuring of GST rates would be part of a broader reform push, aimed at simplifying the multi-tiered tax regime and correcting longstanding issues like inverted duty structures.

Currently, the GST regime operates with four primary tax slabs: 5%, 12%, 18%, and 28%, along with special rates for specific goods and services. The rate rationalisation exercise initiated in 2021 was envisioned to streamline the tax slabs and make the tax structure more equitable in nature.

Adding to the anticipation is the upcoming 56th meeting of the GST Council, expected to occur in August 2025. This will be the first meeting after the longest-ever hiatus in the Council’s history.

The UAE Tax Law Is Evolving — Stay Ahead Before Clients Find Someone Who Already Is, Enroll Now

Reports indicate that the Council may consider rate cuts on key consumer goods such as tractors, air conditioners, and pure term life insurance. Tractors, currently taxed at 12%, may be moved to the 5% slab to ease the burden on farmers amid rising costs due to new environmental regulations.

Meanwhile, air conditioners, currently taxed at 28%, may see a rate reduction ahead of the introduction of new energy efficiency norms slated for January 2026. Similarly, GST on term life insurance could potentially be slashed from 18% to 5%, providing much relief to policyholders .

Amidst all the buzz, one thing is certain: no GST rate cuts can be expected in the immediate future. While GST rate cuts remain a possibility in the policy pipeline, taxpayers will have to crunch it out a bit longer.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates