New Delhi: Term life insurance policies, and senior citizens’ health insurance premium are likely to be exempted from GST as most members of a state ministerial panel favoured cutting taxes to benefit the common man, an official said on Saturday.
The GoM will decide on GST on health and life insurance premiums in its meeting on Saturday. It decided to exempt GST on premiums paid by individuals other than senior citizens for health insurance with coverage of up to Rs 5 lakh. However, 18 per cent GST will continue to be levied for health insurance cover of over Rs 5 lakh, reported PTI.
Separately, the GoM on GST rate rationalisation, too, met on Saturday and suggested that the GST Council rejig tax rates on a host of goods, including packaged drinking water, bicycles, exercise notebooks, luxury wristwatches, and shoes.
A final decision on GST on health and life insurance premiums, as well as rate rationalisation, is likely to the taken by the GST Council, chaired by Union Finance Minister and comprising state counterparts, in its meeting scheduled to take place next month, PTI added.
“The rate rejig exercise will help the states and Centre to realise revenue gain of Rs 22,000 crore, which will help cover the revenue loss from reduction in GST rates for insurance premiums,” an official told PTI.
The GoM on rate rationalisation proposed reducing GST on packaged drinking water of 20 litre and above to 5 per cent from 18 per cent. If the GoM’s recommendation is accepted by the GST council, GST on bicycles costing less than Rs 10,000 will be reduced to 5 per cent from 12 per cent. Also, GST on exercise notebooks will be reduced to 5 per cent from 12 per cent. The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18 per cent to 28 per cent. It also proposed hiking GST on wristwatches above Rs 25,000 from 18 per cent to 28 per cent.
Talking to reporters after the GoM meetings, Bihar Deputy Chief Minister Samrat Chaudhary, who is the convenor of the health and life insurance GoM, said “every GoM member wants to give relief to people. Special focus will be on senior citizens. We will submit a report to the Council. A final decision will be taken by the Council”.
Chaudhary, who is also a convenor of the GoM on rate rationalisation, said the panel will meet again before submitting its report to the Council. This was the first meeting of the 13-member GoM health and life insurance premiums, which was set up to last month to suggest tax rates. The panel, which includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana, has been mandated to submit its report to the GST Council by October- end.
In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premiums, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premiums. The six-member Group of Ministers (GoM) on GST rate rationalisation includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Kerala Finance Minister K N Balagopal.
To make good the revenue loss that will be incurred on account of lowering the tax rate on goods used by the common man, the GoM also discussed the possibility of raising tax rates on some items, including aerated water and beverages. Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28 per cent. Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury and sin goods attract cess on top of the highest 28 per cent slab. The average GST rate has fallen below the revenue-neutral rate of 15.3 per cent, prompting the need to start discussions on GST rate rationalisation.