Upcoming GST Council Meet May Slash Rates: Tractors, ACs, and Insurance Could Get Cheaper

The 56th meeting of the GST Council is expected to take place soon, likely in August 2025, after being delayed for several months. This meeting has drawn a lot of attention as it may bring significant tax cuts on commonly used products and services such as tractors, air conditioners, and term life insurance.

The upcoming meeting is especially important because it will be held after the longest gap in the Council’s history. Many observers are hoping that this will result in long-awaited reforms to simplify the tax system and support consumer spending.

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A major change being discussed is the possible removal of the 12 percent slab. If that happens, items in that category would be moved to either the 5 percent or 18 percent slab, depending on the nature of the product or service.

Tractors, which are currently taxed at 12 percent, may be moved to the 5 percent category. This would help reduce their cost for farmers, especially since new environmental rules known as TREM-IV are making them more expensive. Reports suggest that this could support agricultural productivity and make farming equipment more affordable.

Companies like Mahindra & Mahindra (M&M) are expected to benefit from improved sales and better operating margins.

Air conditioners (ACs) are currently taxed at 28%, one of the highest GST rates. The Council may look to reduce this rate, making ACs more affordable, especially ahead of the new BEE energy efficiency norms set to take effect in January 2026.

These upcoming norms are likely to increase AC prices by 3-5%. A reduction in GST could help ease that burden on consumers while supporting sales for brands like Voltas and Havells.

The government may also lower GST on pure term life insurance from 18% to 5%. This would bring much-needed relief to policyholders and could encourage more people to buy life insurance.

Despite the reduced GST, insurers would still be allowed to claim input tax credit, maintaining cost efficiency for insurance companies.

The compensation cess levied on items like luxury cars and tobacco to offset state revenue losses is due to expire in March 2026. It may be replaced by a Health Cess or Clean Energy Cess, especially for large cars and SUVs. Experts believe tax rates on such items may continue under new names.

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