Sensex Rises 200+ Points as GST Council Poised for Major Tax Overhaul
Tax Cuts Expected for Garments, Tyres; Insurance GST Relief on the Table
The Indian stock market started the week on a positive note, with the Sensex rising over 200 points and the Nifty holding above 24,600. Investor optimism is driven by the upcoming 56th Goods and Services Tax (GST) Council meeting on September 3–4, where major tax reforms are expected.
The Council is considering simplifying the existing four-tier GST slab into two rates: 5% for essential and merit goods, and 18% for standard goods. This aims to make many products, including electronics, appliances, hybrid cars, and personal care items, more affordable for consumers.
Certain sectors also anticipate specific changes. Garments and tyres may see lower GST rates, boosting these industries and consumer demand. Conversely, tax hikes are being considered for pan masala, gutkha, and cigarettes to increase revenue and discourage consumption.
Gold and silver prices have hit record highs, reflecting rising demand and potentially influencing taxation decisions on precious metals. In a related update, the Group of Ministers (GoM) on health and life insurance has agreed in principle to reduce GST on individual life and health insurance policies. The GoM supports exempting these policies from GST but stresses that insurers must pass the tax savings directly to policyholders. States like Karnataka, West Bengal, Kerala, Punjab, and Tamil Nadu emphasize that the exemption should benefit consumers, not insurers.
While the reforms aim to boost consumption and improve tax compliance, some states are concerned about potential revenue losses. Kerala has proposed revising the revenue-sharing formula to a 60:40 split, favoring states, instead of the current 50:50. Opposition-ruled states support the slab cuts but seek protections for their finances.
Market analysts point to these reforms and India’s stronger-than-expected GDP growth as key drivers of market gains. Strong performances in the automobile and IT sectors, helped by a weakening rupee, add to positive sentiment.
As the GST Council meets, investors and consumers alike will closely monitor the outcomes, which could have a significant impact on the Indian economy and markets in the coming months.