The GST Council is set to gather in Jaisalmer on December 21 to discuss potential relief from the 18% GST on life and health insurance purchases. However, it’s uncertain if this relief will be comprehensive, as both the central and state governments would face significant revenue losses if all life and health insurance purchases were exempt from GST.
Since the state also benefits from the revenue collected by the Centre, only a limited amount of health insurance purchases might be fully exempted from GST, possibly up to five lakhs. Additionally, individual health insurance purchases made by senior citizens could be exempted.
What kind of relief can you expect for insurance?
While individual life insurance purchases might see GST exemptions, collectively, life and health insurance purchases could see a reduction in GST rates from 18% to either 12% or 5%. There may also be relief on insurance renewals. The last GST Council meeting didn’t reach a decision on eliminating GST for life and health insurance, instead passing it to a Group of Ministers (GoM) for further review.
The GoM has also been tasked with providing a report on the rationalization of GST rates for around 150 products, including footwear and clothing. There are discrepancies between the GST rates for raw materials and finished goods, which complicates the input tax credit process.
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When will a decision on insurance relief be made?
According to sources, the GoM is expected to present its report at the council meeting on Saturday, but an immediate decision may not be possible. The GoM includes ministers from five to seven states, and it’s not guaranteed that all states will agree with the GoM’s recommendations. Every state’s approval is crucial for any decision made by the council.
According to sources, it is unlikely to take a decision on rationalizing GST rates of about 150 items on Saturday. The biggest hurdle in rationalising rates is that no state will agree to a reduction in rates quickly as it leads to loss of revenue. Where there is a recommendation to increase GST rates, it can be easily accepted as it will benefit the states from revenue.
Discussion on raising tax on tobacco products
The GoM has recommended a GST rate on tobacco products to be increased from 28 per cent to 35 per cent. This recommendation can be approved, but on Saturday, the council will discuss this recommendation before the states. Union Finance Minister Nirmala Sitharaman is the chairperson of the GST Council.
