GST Council defers decision to reduce tax on health, life insurance

Bihar's Deputy Chief Minister Samrat Chaudhary said another meeting of the GoM is scheduled for January before the proposal is reintroduced to the GST Council

The GST Council postponed the decision to reduce the Goods and Services Tax rates on health and life insurance premiums during its 55th meeting on Saturday, according to Bihar's Deputy Chief Minister Samrat Chaudhary, who also leads the Group of Ministers (GoM) on insurance. 

 

Noting that further discussions are necessary, Chaudhary said another meeting of the GoM is scheduled for January before the proposal is reintroduced to the Council.

 

“For the report which was to be given by the GST GoM, many ministers were of the view that one more meeting should happen. Whether it is for group insurance, individual insurance or senior citizens’ insurance, we will do another meeting for it. We will discuss it all in the next meeting,” Chaudhary said. 

 

 

Earlier, the GoM was believed to have suggested exemption on health insurance for senior citizens and term life insurance and lowering GST to 5 per cent on health insurance with a coverage of Rs 5 lakh. 

 

Chaudhary, who is also the convenor of GoM on rate rationalisation, said that a report related with rate on 148 items was not tabled.

 

Sources indicate that the GoM did not reach a consensus on insurance premiums, as several states expressed concerns regarding potential revenue losses resulting from the proposed reduction in GST rates.

 

The GOM previously considered exempting GST on health insurance premiums for senior citizens and on term life insurance premiums for everyone, including family plans. They looked at granting an exemption for health insurance premiums paid by senior citizens, regardless of coverage, while also considering a GST exemption for health insurance covers up to Rs 5 lakh for other individuals. The current rate of 18 per cent would remain applicable for health insurance coverage exceeding Rs 5 lakh.

 

Additionally, the Council examined the classification of ready-to-eat popcorn mixed with salt and spices. It was determined that this type of popcorn, which has characteristics similar to namkeens, should be subject to a 5 per cent GST (unless pre-packaged and labelled) and a 12 per cent GST if it is pre-packaged and labelled. In contrast, popcorn coated with sugar (like caramel popcorn) would be classified as sugar confectionery and therefore attract an 18  per cent GST.

 

The Council deffered the dicussio on proposals for lowering GST rates on life and health insurance premiums. At the same time, the GoM on GST rate rationalisation has recommended raising taxes on luxury and sin goods. A key topic for discussion is the possible inclusion of aviation turbine fuel (ATF) in the GST framework. If this is approved, it would create uniform taxation across states and allow airlines to claim input tax credit (ITC) on ATF, fulfilling a long-standing request from the aviation industry.

 

Additionally, the Council looked into rate changes for 148 items, including used electric vehicles (EVs) and smaller petrol and diesel vehicles, which may see an increase in GST rates from 12 per cent to 18 per cent.

 

When GST was launched on July 1, 2017, five major commodities — crude oil, natural gas, petrol, diesel, and ATF — were excluded from its application, leaving central and state governments to continue levying excise duty and VAT. The inclusion of these commodities under GST has been a longstanding demand from various industries, especially in the aviation sector.