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%.

Union Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary and Revenue Secretary Sanjay Malhotra during the 51st Goods and Services Tax (GST) Council Meeting, in New Delhi, on August 2, 2023.
| Photo Credit: PTI

The GST Council on August 2 blinked a little on technicalities and kept the door open for a review down the road, but stuck to its earlier decision to impose a 28% levy on the full face value of bets placed on online gaming, casinos and horse racing, with an eye on implementing it from October 1.

Finance Minister Nirmala Sitharaman, who chaired the Council’s meeting, said the Centre would now strive to amend the Goods and Services Tax (GST) law in Parliament’s current session itself to enable the implementation of the levy, despite dissent from Sikkim and Goa over the modalities of the tax for casino users.

Tamil Nadu Finance Minister Thangam Thennarasu raised concerns about the levy’s impact on the State-wide ban on online gaming, which Ms. Sitharaman said would be addressed in the language of the new norms to explicitly state the tax cannot be levied where a ban is in place.

Also read: Explained | Will 28% GST on online gaming affect its growth? 

Delhi government’s representative sought a fresh review for the online gaming sector, but most other States leaned towards sticking to the Council’s decision last month which had been taken after three years of deliberations, the Finance Minister conveyed after the virtual meeting.

The online gaming industry, which had termed the Council’s decision a death knell endangering billions of dollars of investments and thousands of jobs in the sunrise sector, remained anxious but appreciated a critical clarification on the valuation rules for the 28% levy, approved by the Council on Wednesday.

Simply put, if someone enters a casino by buying chips worth ₹1,000, plays a round and wins ₹300, the tax will not be levied on ₹1,300, but on the entry amount of ₹1,000 alone, Ms. Sitharaman explained. In a joint statement, the E Gaming Federation and Federation of Indian Fantasy Sports welcomed this would address their concerns of “repeat taxation”.

“The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India,” they added.

“…Because Goa and Sikkim [who wanted the 28% levy on casino bets to apply on gross gaming revenue and not the entire face value] kept appealing that they were small States and needed consideration, the Council agreed to come back after six months after implementation to review the way in which this is getting implemented,”

Revenue Secretary Sanjay Malhotra hinted the scope of the review will likely be limited to issues about valuation and the tax rates, which can be tweaked through notifications and rules, while the GST law changes will be broader “enabling provisions”.

Apart from the central GST law amendments, States will also have to amend their GST laws for the new tax to kick in, but Ms. Sitharaman expressed hope it can be implemented from October 1.

While the changes will not be retrospective per se, Mr. Malhotra emphasised they are more in the nature of a clarification because betting, gambling and lottery are already included as actionable activities under the GST law.

The Revenue Department believes online gaming, horse racing and casinos are also in the nature of betting only, he said. The High Court of Karnataka has not upheld that stand, dismissing a ₹21,000 crore tax demand against Gameskraft Technologies. “We have filed a special leave petition on the matter yesterday [Tuesday] and whatever the Supreme Court decides, will prevail,” the Revenue Secretary said.