GST Council to Discuss Insurance Tax and Rate Reshuffle for Over 100 Items

The Goods and Services Tax (GST) Council is set to meet in Jaisalmer, Rajasthan, on December 21 to deliberate on important matters concerning the tax system in India. Among the key issues to be discussed are the proposed relief on GST for health and life insurance premiums, and the revision of GST rates on over 100 items. Originally scheduled for November, this meeting was postponed due to assembly elections in Jharkhand and Maharashtra. The meeting will take place after the winter session of Parliament, which runs from November 25 to December 20.

Group of Ministers (GoM) Panels Created for Tax Reviews

In its previous meeting held on September 9, the GST Council formed two Group of Ministers (GoM) panels to address specific areas of concern. One panel was tasked with reviewing GST rates on various items, while the other focused on determining the appropriate tax to be levied on health and life insurance premiums. These panels are expected to submit their reports before the upcoming meeting, based on which the GST Council will make final decisions.

Health and Life Insurance GST Discussion

The GoM assigned to review the tax on health and life insurance has already proposed certain relief measures. On October 19, the panel suggested that GST should not be levied on term life insurance, health insurance premiums up to Rs 5 lakh, and premiums paid by senior citizens aged 60 and above. However, the panel did not recommend a full exemption of health insurance from GST, which is currently set at 18%. The proposal to fully exempt term life insurance from GST is estimated to cost the government around Rs 200 crore annually, while exempting senior citizens’ health insurance premiums could result in an additional Rs 3,000 crore in lost revenue. Between FY22 and FY24, the total GST collected from health insurance premiums amounted to approximately Rs 21,000 crore.

GST Rate Adjustments on Over 100 Products

Another GoM focused on the rationalisation of GST rates for a wide range of products. This panel recommended adjustments to GST rates on about 100 items, which is expected to result in a significant change in government revenue. The proposed changes include both hikes and cuts in tax rates. The GoM’s recommendations are projected to raise Rs 22,000 crore annually in additional revenue, to be shared equally between the central and state governments.

Some notable changes under consideration include lowering the GST rates on certain products such as 20-litre packaged drinking water bottles, bicycles, and exercise notebooks from 18% to 5%. In contrast, the panel proposed increasing the tax rates on high-end luxury items like wrist watches priced above Rs 25,000 and shoes above Rs 15,000. These products would see an increase in GST from 18% to 28%.

Impact and Next Steps

The proposed changes, once finalized, could have a significant impact on both consumers and businesses. Lowering taxes on essential products like bicycles and water bottles could offer relief to the public, particularly in the context of rising inflation. Conversely, the higher taxes on luxury items would increase the cost of high-end consumer goods, potentially affecting the affluent segment of the market.

The recommendations will be carefully reviewed by the GST Council in its December 21 meeting. If approved, they could lead to considerable shifts in India’s GST framework and provide new opportunities for the government to generate additional revenue, while also offering tax relief in select sectors. The implementation of these changes, once finalized, will provide clarity for businesses and consumers alike, paving the way for more streamlined tax processes and financial planning.

Conclusion

The upcoming GST Council meeting in Jaisalmer will be pivotal in determining the future direction of GST policy in India. With the review of health and life insurance taxes and the rationalisation of GST rates on over 100 products, the outcomes of this meeting could have a significant impact on the financial landscape. The decisions made will also provide important insights into how the government plans to balance revenue generation with providing relief to consumers, especially in sectors such as healthcare and essential goods.