GST Council meet to decide on lower taxes on insurance policies, ATF inclusion

Several proposals of Fitment Committee, comprising officials from the Centre and States GST Department would come up for review before the Council. File
| Photo Credit: The Hindu

The 55^th GST Council meeting which is expected to decide on reducing tax rate on health and life insurance, besides considering rate rejigs on 148 items began in Rajasthan’s Jaisalmer on Saturday (December 21, 2024.)

The GST Council, chaired by Union Finance Minster Nirmala Sitharaman and comprising her State counterparts, is also expected to deliberate on bringing Aviation Turbine Fuel (ATF) in Goods and Services Tax fold.

One of the major items on the agenda of the Council is to decide the GST rate on health and life insurance.

A Group of Ministers (GoM) set up by the Council under Bihar Deputy Chief Minister Samrat Chaudhary, in its meeting in November, had agreed on exempting insurance premiums paid for term life insurance policies from GST.

Also premium paid by senior citizens towards health insurance cover has been proposed to be exempted from the tax. Besides, GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to ₹5 lakh is proposed to be exempted.

However, 18% GST will continue on premiums paid for policies with health insurance cover of more than ₹5 lakh. A final decision of the insurance taxation under GST is likely on Saturday (December 21, 2024) as most States are in favour of lowering taxes on premium to give relief to the common man.

Several proposals of Fitment Committee, comprising officials from the Centre and States GST Department would come up for review before the Council. One of the proposals include cutting taxes on food delivery platforms such as Swiggy and Zomato, to 5% (without input tax credit), from the current 18% (with ITC).

It is likely to have proposed a rate hike on sale of used EVs as well as small petrol and diesel vehicles to 18% from the current 12%. This hike would bring used and old smaller cars and EVs at par with old larger vehicles, according to sources.

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Also, the GoM on GST compensation cess is likely to get a six-month extension till June 2025, to submit their report. The compensation cess regime comes to an end in March 2026, and the GST Council has set up a panel of Ministers, under Union Minister of State for Finance Pankaj Chaudhary, to decide the future course of the cess.

Another major item before the Council is the GST rate rationalisation panel’s report, which has suggested rate tweaks in 148 items. The GoM earlier this month decided to submit before the Council their recommendation to hike tax on sin goods, like aerated beverages, cigarettes, tobacco and related products, to 35% from the present 28%.

The four-tier tax slab of 5, 12, 18 and 28% under GST will continue and a new rate of 35% is proposed by the GoM only for sin goods. The GoM also decided to propose rationalising tax rates on apparel. As per the decision, ready-made garments costing up to ₹1,500 would attract 5% GST, those between ₹1,500 to ₹10,000 would attract 18%.

Garments costing above ₹10,000 would attract 28% tax. Currently, garments costing up to ₹1,000 attract 5% GST, while those above that attract 12%.

The GoM also proposed hiking GST on shoes above ₹15,000/pair from 18% to 28%. It also proposed hiking the GST rate on wrist watches above ₹25,000 from 18% to 28%.

“Some of the low hanging fruits in the 148 items that rate rationalisation panel has suggested may be decided in the meeting. But, no major big ticket rate rationalisation is expected,” an official said.

Asked about his views on rate rationalisation and whether he is in favour, Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said: “Taxation system should be more flexible and not be a burden on people. We will present our views.”

The GoM had proposed reducing GST on packaged drinking water of 20 litre and above to 5% from 18% and reducing tax rate on bicycles costing less than ₹10,000 to 5% from 12%. Also, GST on exercise notebooks would be reduced to 5% from 12%.