New Delhi: Two ministerial panels formed by the GST Council will convene today, October 19, to deliberate on the rationalisation of GST rates and the potential reduction of the 18% tax on health and life insurance premiums. This marks the inaugural meeting of the 13-member Group of Ministers (GoM), led by Bihar Deputy Chief Minister Samrat Choudhary, which has been tasked with recommending tax adjustments for health and life insurance premiums.
The panel includes ministers from various states, such as Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. They are expected to submit their findings to the GST Council by the end of October.
Currently, an 18% GST is imposed on health and life insurance premiums. The GoM will propose new tax rates for different types of health insurance, including individual, group, family floater, and policies for specific groups like senior citizens and individuals with mental health issues.
The panel will also consider tax rates for life insurance products, encompassing term insurance and investment-linked plans, whether for individuals or groups, as well as reinsurance.
In the fiscal year 2023-24, the Centre and states generated ₹8,262.94 crore through GST on health insurance premiums, along with ₹1,484.36 crore from health reinsurance premiums.
The GoM will address the possibility of reducing the 12% GST slab and shifting more items to the 5% category, focusing on medical and pharmaceutical products, bicycles, and bottled water. They may also explore merging the 12% and 18% slabs.
To compensate for the expected revenue loss due to lower tax rates on essential goods, the GoM is likely to consider increasing taxes on certain items, such as aerated drinks and other beverages.
Presently, the Goods and Services Tax (GST) operates under a four-tier structure with rates of 5%, 12%, 18%, and 28%. Essential items are either exempt from tax or taxed at the lowest rate, while luxury and demerit goods incur the highest rates. The average GST rate has dipped below the revenue-neutral rate of 15.3%, necessitating discussions on rate rationalisation.
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