panels-to-discuss-gst-cuts-on-insurance-premiums-on-saturday

Two ministerial panels set up by the GST Council are scheduled to meet on 19 October to discuss GST rate rationalisation and the possibility of reducing the 18 per cent tax on health and life insurance premiums.

 

This will be the first meeting of the 13-member Group of Ministers (GoM), led by Bihar Deputy Chief Minister Samrat Choudhary, which was established to review taxes on health and life insurance premiums.

 

The panel, comprising ministers from states including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala, has been tasked with submitting its report to the GST Council by the end of October.

 

Currently, an 18 per cent GST is levied on health and life insurance premiums. The GoM will propose tax rates for various types of health/medical insurance, such as individual, group, family floater, and senior citizen policies, as well as for people with mental illness.

 

 It will also recommend tax rates for life insurance, including term insurance, life insurance with investment plans (both individual and group), and reinsurance.

 

In the 2023-24 fiscal year, the central and state governments collected ₹8,262.94 crore in GST from health insurance premiums and ₹1,484.36 crore from health reinsurance premiums.

 

The GoM on GST rate rationalisation will also discuss reducing the 12 per cent slab, moving more items into the 5 per cent bracket, and adjusting taxes on medical and pharmaceutical items, bicycles, and bottled water.

 

It may also explore merging the 12 and 18 per cent tax slabs. This six-member panel, chaired by Samrat Choudhary, includes finance ministers from Uttar Pradesh, Rajasthan, Karnataka, West Bengal, and Kerala.

 

To offset potential revenue losses from lowering tax rates on goods commonly used by the public, the GoM may consider increasing tax rates on certain items, such as aerated water and beverages.

 

Currently, GST operates under a four-tier structure with tax slabs of 5, 12, 18, and 28 per cent. Essential goods are either exempt or taxed at the lowest rate, while luxury and demerit goods attract the highest rates, with additional cess for certain items. 

 

The average GST rate has fallen below the revenue-neutral rate of 15.3 per cent, prompting discussions on rate rationalisation.