The upcoming meeting of the Goods and Services Tax (GST) Council later this month is expected to bring relief on premium of specified health and life insurance products as well as a gamut of other products but a decision on big ticket rate rationalisation could take some time.
According to sources, a decision on the compensation cess could also take longer as the Group of Ministers is expected to provide a status report on the issue as of now.
The GST Council, headed by Union Finance Minister Nirmala Sitharaman, and members from all states and union territories, is scheduled to meet in Jaisalmer on December 21.
“It is likely that the GST Council could take a decision on providing relief from GST on premium of specified health and life insurance products. However, with revenue considerations remaining a priority for most states, any decision on a large-scale rate rationalisation may not happen at one go,” said a source familiar with the development.
Several states remain concerned about potential revenue losses from any big change in GST rates and are understood to be in favour of maintaining a status quo on rates for now.
A Group of Ministers on rate rationalisation chaired by Bihar Deputy Chief Minister Samrat Chaudhary is understood to have prepared a report suggesting a rejig in GST rates of nearly 150 items including clothing and footwear as well as a special rate of 35% for tobacco and aerated drinks.
However, the Central Board of Indirect Taxes and Customs had underlined that any decision would be taken by the GST Council. “The GST Council has not yet deliberated on any GST rate changes. The Council has not even received the recommendations of the GoM. Infact the GoM has yet to finalise and present its recommendations to the Council after which the Council will take a final view on the recommendations of the GoM,” it had said in a post on X on December 3.
Meanwhile, sources indicated that the GoM under Union Minister of State of Finance Pankaj Chaudhary to make a taxation proposal to replace the compensation cess after its abolition is unlikely to submit a final report at the upcoming meeting. “The GoM is likely to provide a status report for now as it is yet to firm up its views on what has to be done with the compensation cess,” said the source.
He however, underlined that states are on board with continuing a levy in place of the compensation cess but the exact mechanism and proposal have to be finalised. The compensation cess is expected to end by March 2026 and the repayment of the loan is likely by January 2026. The GoM will look into what happens to the cess post its sunset date.
GST on Insurance Premium
At present, an 18% GST on insurance premium is charged. Sources indicated that the Council is likely to okay a proposal to exempt health and life insurance policies up to Rs 5 lakh from GST. The objective is to lower the taxation burden on lower- and middle-income groups. It is also likely to provide similar exemptions for policies for senior citizens.
These are also the key suggestions of the GoM on health and life insurance set up under Bihar Deputy CM. The GoM will submit its report to the GST Council at the upcoming meeting.
