Big GST cuts likely announced before Diwali 

India is considering major tax reform that could lower Goods and Services Tax (GST) on small cars and insurance premiums. According to a government source, the proposal suggests reducing GST on small petrol and diesel cars to 18% from the current 28%. The move is part of a wider set of changes aimed at boosting consumption and simplifying the tax structure.

GST on health and life insurance premiums may also be reduced, possibly to 5% or even zero, down from the current 18%, the source added. If approved, the tax cuts are likely to be announced before Diwali, in October, as that is usually the country’s busiest shopping season.

A lower tax rate is expected to benefit major automakers, especially Maruti Suzuki, which has historically dominated this segment. Cars such as the Alto, Dzire, and Wagon-R make up nearly half of Maruti’s sales. Other manufacturers like Hyundai and Tata Motors are also expected to gain.

The proposal to reduce GST on insurance premiums could make health and life cover more affordable. Industry experts say this would be a welcome change and could help improve insurance penetration across the country.

India is also considering replacing the current four-rate GST structure (5%, 12%, 18% and 28%) with just two slabs — 5% and 18%. The final decision will be taken by the GST Council by October. The Council is chaired by the Union Finance Minister and includes representatives from all states.

Taxpayers and businesses are now waiting for further clarity, which is expected in the coming weeks, as the government finalises what could be the biggest overhaul of GST since its launch in 2017.