The GST Council is likely to meet immediately after the winter session of the Parliament. The 55th meeting will be crucial especially for the GST rate rejig on insurance products and on many other items such as the 20-litre bottled water, bicycles, exercise notebooks, high-end wristwatches and shoes.
The winter session of the Parliament is set to begin on November 25 and scheduled to end on December 20. According to an official, the Council is expected to meet between December 20 to 25 in Rajasthan. Finance Minister Nirmala Sitharaman is the current Chairperson of the Council while the Minister of State in the Finance Ministry, Ministers of 28 States and of the 3 Union Territories (with legislatures) are the Members of the Council. Revenue Secretary Sanjay Malhotra is currently the Secretary to the Council.
While the agenda of the meeting is yet to be finalised, a few issues are almost certain to be taken up. These include the rate structure rejig for insurance products, progress of the rate rationalisation committee, along with rate rejig on a few goods and services and the future of the compensation cess. Tthe GoM on insurance appears to have completed its deliberations. It was asked to finalise the report by October 30.
In a meeting on October 19, members of the GoM advocated exempting premiums paid on health insurance for senior citizens and term life insurance. The meeting was chaired by Bihar’s Deputy Chief Minister Samrat Chaudhary. “Every GoM member wants to give relief to the people. Special focus will be on senior citizens. We will submit a report to the council. A final decision will be taken by the council,” Chaudhary had said after the meeting but without giving further details.
However, a member of the GoM said that a view emerged about exempting premiums paid on health insurance for senior citizens and policy for all with ₹5-lakh coverage. Similarly, in the case of term life insurance, with family members’ premiums being fully exempted, the members said that for all other policies, GST rates should remain at 18 per cent.
Rates for insurance products
As things stand, the GST rate on premia for health insurance, term and unit-linked insurance plans attracts 18 per cent GST. On endowment plans, the GST is applied differently. While it is 4.5 per cent for premium paid during the first year, it is 2.25 per cent from the second year. For life insurance in the form of single premium annuity policies, the GST rate is 1.8 per cent. Rates are the same for all age groups.
Another GoM, under the convenorship of Chaudhary, on rate rationalisations also held the meeting on same day and agreed to recommend lowering tax rates on 20-litre packaged drinking water bottles, bicycles and exercise notebooks to 5 per cent but suggested raising taxes on high-end wristwatches and shoes “The entire exercise would lead to a revenue gain of ₹22,000 crore. “This would help cover revenue loss from insurance,” an official said.
According to him, the GoM proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent. If the GoM’s recommendation is accepted by the GST Council, GST on bicycles costing less than ₹10,000 will be reduced to 5 per cent from 12 per cent. Also, GST on exercise notebooks will be reduced to 5 per cent from 12 per cent.
The GoM also suggested hiking GST on shoes above ₹15,000 a pair and on wrist watches above ₹25,000 from 18 per cent to 28 per cent. Earlier, it had discussed tax rate tweaks on over 100 items, including lowering taxes on certain goods from 12 to 5 per cent, to relieve the common man. Some items in the 18 per cent slab, like hair dryers, hair curlers, and beauty or make-up preparations that the GoM took up, could be back in the 28 per cent bracket.
The GoM’s recommendation would be taken up by the GST Council. As on date, there are four key rates – 5, 12, 18 and 28 per cent besides special rates such as 0.25 per cent (rough diamond), 1 per cent (affordable housing) and 3 per cent (gold).
Source – The Hindu Business Line
