GST council eyes rate overhaul; Nomura expects tractors, ACs to benefit

Nomura expects GST relief on tractors, ACs, and insurance as council weighs rate cuts.

The upcoming GST Council meeting, likely to take place in July, could bring relief for buyers of air conditioners, tractors, and term life insurance. According to reports, the council may consider removing the 12 percent GST slab and shifting items to the 5 percent or 18 percent brackets, which would simplify the tax structure and support demand in key sectors.

Among the products that could benefit are tractors and air conditioners (ACs). Tractors, currently taxed at 12 percent, may move to the 5 percent rate if the slab is scrapped. This would make tractors more affordable, boosting demand — particularly helpful as stricter emission norms (TREM-IV) are set to raise costs. Lower taxes could also improve pricing flexibility and operating leverage for companies like Mahindra & Mahindra, noted analysts at Nomura.

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Similarly, analysts said that ACs could be among the few consumer goods taxed at the highest slab of 28 percent, alongside large televisions. Any GST cut on ACs would help offset the expected cost increase from new energy efficiency norms (BEE) coming into effect in January 2026. This could support demand for brands like Voltas and Havells.

The council is also considering reducing GST on term life insurance from 18 percent to 5 percent, while continuing to allow insurers to claim input tax credits.

India’s current GST structure has five main slabs: 0 percent, 5 percent, 12 percent, 18 percent, and 28 percent. The 12 percent slab includes products such as packaged food items (like condensed milk and fruit juices), household goods (furniture, sewing machines), medical supplies (bandages, diagnostic kits), and tractors. Nomura observes that the 12 percent slab has added complexity without delivering significant revenue benefits.

Another issue on the table is the compensation cess, set to expire in March 2026. Nomura notes this may be replaced by a Health Cess and a Clean Energy Cess, though final details and revenue-sharing mechanisms with states will require approval.