GST Council to Address Insurance Tax and Rate Revisions
Date: November 16, 2024
Category: 55th GST Council
The 55th GST Council Meeting, scheduled for December 21, 2024, in Jaisalmer, Rajasthan, will focus on two important topics:
- GST relief on health and life insurance premiums
- Rate rationalization for over 100 items
This meeting, chaired by Finance Minister Nirmala Sitharaman, was postponed from November due to state elections and the winter session of Parliament.
Key Discussions and Proposals
GST on Insurance Premiums
The Group of Ministers (GoM) on health and life insurance premiums has suggested several revisions:
- Exemptions:
- Term-life insurance would no longer attract GST.
- Health insurance premiums up to ₹5 lakh, especially for individuals and senior citizens (above 60 years), may be exempted.
- Partial Relief:
- An 18% GST rate will still apply to other health insurance premiums.
- Impact on Revenue:
- Exempting term-life insurance could lead to a ₹200 crore annual revenue loss.
- Relief on senior citizens’ health insurance premiums might cost approximately ₹3,000 crore per year.
Meanwhile, GST collections from health insurance premiums between FY22 and FY24 totaled nearly ₹21,000 crore.
Rate Rationalization on Goods
The GoM on rate rationalization has also proposed adjustments to GST rates for over 100 items:
- Reductions:
- Packaged drinking water (20 litres), bicycles, and exercise notebooks may be taxed at 5%, reduced from the current 12%-18%.
- Increases:
- Luxury goods, including wristwatches priced above ₹25,000 and shoes costing over ₹15,000, could see their GST rate increase to 28%, up from 18%.
- Revenue Projections:
- These changes are expected to generate an additional ₹22,000 crore annually, equally benefiting both the Centre and states.
Broader Implications
For Consumers
- Essential goods like packaged water and bicycles may become more affordable, benefiting middle- and lower-income households.
- However, luxury items might become more expensive due to higher GST rates.
For the Government
- These measures aim to increase revenue while making essential goods accessible to the public.
The GST Council will finalize these proposals during its meeting, following a thorough review of the GoMs’ reports.
