December 21st 2024.
The GST Council meeting that took place on Saturday in Jaisalmer had some important discussions and decisions to make regarding taxes on health and life insurance. However, the decision on reducing these taxes was postponed for now. Additionally, the Council did not table the much-discussed recommendation of rate changes for 148 items that was proposed by the GoM (Group of Ministers).
During the meeting, some members of the Council, including Union Finance Minster Nirmala Sitharaman and her state counterparts, felt that more deliberation was needed before making a final decision on insurance taxation. The GoM on insurance, led by Bihar Deputy Chief Minister Samrat Chaudhary, stated that another meeting would be required to come to a conclusion on taxation for group, individual, and senior citizen policies. Chaudhary told reporters, "Some members suggested that we should have further discussions and we have decided to meet again in January."
The report of the GoM on rate rationalisation, which had recommended changes in tax rates for 148 items, was also not presented before the Council. Chaudhary, who is the convenor of the panel, mentioned that the report would be submitted in the next meeting of the Council. The current meeting will also discuss bringing Aviation Turbine Fuel under the Goods and Services Tax.
The Council will also review several proposals from the Fitment Committee, which comprises officials from the Centre and state GST departments. One of the proposals on the table is to reduce taxes on food delivery platforms such as Swiggy and Zomato from 18% to 5%. Additionally, there may be a proposal to increase taxes on the sale of used electric vehicles, small petrol and diesel cars, from 12% to 18%. This change would bring the tax rate for used and old smaller cars and EVs in line with that of old larger vehicles.
There is also speculation that the Group of Ministers on GST compensation cess may receive a six-month extension to submit their report, until June 2025. The compensation cess regime is set to end in March 2026, and the Council has formed a panel of ministers, led by Union Minister of State for Finance Pankaj Chaudhary, to determine the future course of the cess.
The GoM on insurance has recommended exempting term life insurance premiums from GST and exempting health insurance premiums paid by senior citizens from the tax. It has also proposed exempting GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh. However, premiums for policies with health insurance cover over Rs 5 lakh will continue to be taxed at 18%.
The report of the GoM on GST rate rationalisation, which has suggested changes in tax rates for 148 items, was not presented before the Council and will be taken up in the next meeting. In an earlier meeting, the GoM had agreed to increase taxes on "sin goods" such as aerated beverages, cigarettes, and tobacco products from 28% to 35%.
Currently, the GST tax structure has four tiers with slabs at 5%, 12%, 18%, and 28%. Luxury and demerit goods are taxed at the highest bracket of 28%, while essential items are taxed at the lowest slab of 5%. The GoM has also proposed rationalising tax rates on apparel, where ready-made garments costing up to Rs 1,500 will be taxed at 5%, those between Rs 1,500-10,000 at 18%, and those above Rs 10,000 at 28%. Currently, garments costing up to Rs 1,000 are taxed at 5%, while those above that are taxed at 12%. The GoM has also recommended increasing the GST rate on shoes priced above Rs 15,000 from 18% to 28%, and on wristwatches priced above Rs 25,000 from 18% to 28%.
Lastly, the GoM has proposed reducing the GST on packaged drinking water of 20 litres and above from 18% to 5%, and reducing the tax rate on bicycles costing less than Rs 10,000 from 12% to 5%. It has also suggested reducing the tax on exercise notebooks from 12% to 5%. These proposals will be discussed and reviewed by the Council in its next meeting.
[This article has been trending online recently and has been generated with AI. Your feed is customized.]
[Generative AI is experimental.]
