55th GST Council Meeting: It might cut tax rates on life and health insurance premiums, apart from raising it on high-end wrist watches, shoes and apparels, among other decisions.
55th GST Council Meeting: The GST Council’s 55th meeting, chaired by Union Finance Minister Nirmala Sitharaman and comprising state finance ministers, is set to convene on Saturday in Jaisalmer, Rajasthan. The apex body on indirect taxes is expected to discuss significant rate changes across various categories, including life and health insurance, luxury goods, and aviation turbine fuel (ATF).
Key Proposals:
Life and Health Insurance
The Council is expected to consider proposals to cut GST rates on life and health insurance premiums. Recommendations include:
- Exemption of GST on premiums for term life insurance policies.
- Exemption of GST on health insurance premiums paid by senior citizens.
- Exemption of GST on health insurance premiums for policies covering up to ₹5 lakh for individuals other than senior citizens.
- Continuation of 18% GST on premiums for policies with coverage exceeding ₹5 lakh.
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Luxury Goods and Sin Goods
The Group of Ministers (GoM) on GST rate rationalisation has recommended tax hikes on luxury and sin goods, including:
- Wristwatches priced above ₹25,000: GST increase from 18% to 28%.
- Shoes priced above ₹15,000 per pair: GST increase from 18% to 28%.
- Ready-made garments:
- Costing up to ₹1,500: GST at 5%.
- Costing between ₹1,500 and ₹10,000: GST at 18%.
- Costing above ₹10,000: GST at 28%.
- Sin goods such as aerated beverages, cigarettes, and tobacco: Introduction of a 35% tax slab from the current 28%.
Tax Reductions
- Packaged drinking water (20 liters and above): GST reduction from 18% to 5%.
- Bicycles costing below ₹10,000: GST reduction from 12% to 5%.
- Exercise notebooks: GST reduction from 12% to 5%.
Aviation Turbine Fuel (ATF)
The Council is expected to deliberate on including ATF under GST. If approved, this move would bring uniformity in taxation and allow airlines to claim input tax credit (ITC) on ATF, a long-standing demand of the aviation industry.
Currently, ATF is taxed through a combination of central excise duty and state-level VAT. Including it in GST is expected to reduce operational costs for airlines and streamline the tax structure.
Other Expectations
- The Council is expected to discuss 148 items for potential rate changes, including items like used electric vehicles (EVs) and smaller petrol and diesel vehicles, which could see a rate hike from 12% to 18%. Officials earlier said, “The net revenue impact of rate rejigs will be positive.”
- Recommendations to extend the GST compensation cess regime until June 2025.
- Proposals to cut GST rates on food delivery platforms such as Swiggy and Zomato from the current 18% (with ITC) to 5% (without ITC).
When GST was introduced on July 1, 2017, five commodities—crude oil, natural gas, petrol, diesel, and ATF—were kept outside the GST framework, with the central and state governments continuing to levy excise and VAT. Revisiting their inclusion under GST has been a key demand from several industries, especially aviation.
