With the dates for the next Goods & Services Tax (GST) Council meeting expected to be announced soon, hopes that the much-awaited rate rationalisation exercise will be taken up—and many proposals passed – is rising. Brokerages and experts are pencilling in an opportunity for significant changes to not only the rates but also the GST structure itself.

Sources are now indicating that the GST Council may meet only at the end of August; meanwhile, brokerage firm Jefferies believes there is a high probability that a wide range of large consumption items are ripe for lower rates. It cites health insurance and term life insurance premiums as two such items. Others include cement, which is currently taxed at 28%, while other building materials like paints are taxed at a lower rate. Jefferies argues that the possibility to cut GST on cement from 28% to 18% exists.

“Significant items with demand for rate cuts include Hybrid PVs (taxed the same as ICE vehicles), life insurance premiums and telecom services (both 18%). government may also consider shifting the 12% GST rate items to 5% or 18% with potential beneficiaries of lower rates including processed foods, footwear & apparel,” its note says.

Japanese brokerage firm Nomura, meanwhile, makes a case for some rate equalisation in the consumer durable space. “ACs is the only category (apart from >32” TVs) which is taxed at 28%. Therefore, any potential reduction in the tax rates should benefit the demand for ACs as well, especially given the upcoming BEE norms (from Jan-26), which raise the cost by 3-5% and happens every few years,” it says in its note.

Tractors are another category brokerages believe are prime for a rate reduction from the current 12% to 5%, making tractors more affordable and aiding demand, crucial for an economy that is still largely agrarian. It won’t hurt tractor-makers either, Nomura argues: “While companies are likely to pass on most of the tax reduction to the end consumer, it nevertheless improves their pricing power and operating leverage.”

Another major structural change that is being spoken about is the inclusion of new items into the GST umbrella. Natural gas is one such. Oil & Gas Minister Hardeep Puri has spoken on the central government’s desire and push to include the commodity under the tax. He is quoted as having said in January, “There are a large number of states that earlier had reservations, like Gujarat, Maharashtra and Madhya Pradesh. But they are more or less seeing the benefits of it.”

All this, combined with the rising supposition that the government is working towards bringing the number of tax slabs under GST down from the current 5-tax rate structure (0%, 5%, 12%, 18%, and 28%) also has experts sitting up. Nomura says, “While the 5% and 18% slabs capture essential and discretionary items, respectively, the 12% slab has long been seen as an administrative complication that adds marginal differentiation without any significant revenue advantage.” The 12% slab currently includes items like packaged foods, household goods a la furniture and sewing machines, and medical supplies such as bandages.

Source: CNBC TV-18