GoM proposes GST Rate Changes Majorily for over 100 Products

A Group of Ministers (GoM) given the responsibility of reviewing the Goods and Services Tax (GST) on life and health insurance premiums, is thinking about tax exemptions for certain policies. The panel is likely to recommend a GST exemption for term life and health insurance coverage of up to Rs.5 lakh for senior citizens over the age of 60. However, the GoM has refrained from advocating for a full tax exemption on all health insurance, where the current GST rate is 18%.

During its meeting on Saturday, the GoM addressed the financial implications of these exemptions, estimating that removing GST from term life insurance would cost the exchequer around Rs.200 crore per year, whereas exempting senior citizens’ health insurance would result in a Rs.3,000 crore revenue loss. Over the last three financial years, health insurance premiums have contributed Rs. 21,000 crore to GST.

The GoM will submit its recommendations to the GST Council by the end of October, and the Council will make the ultimate decision.

Furthermore, the panel addressed the GST on approximately 100 products, proposing rate reductions on 20-litre packaged water bottles, bicycles and exercise notebooks to 5% while recommending hikes on luxury items such as wristwatches priced above Rs.25,000 and shoes priced above Rs.15,000, among other products. These rate changes are estimated to generate an additional Rs.22,000 crore in revenue, perhaps offsetting the cost of the planned insurance premium exemptions.

Currently, 18% GST is levied on life insurance premiums for term and family floater policies, as well as on health insurance.

“Some members suggested reducing the GST from 18% to 5% on health and life insurance premiums, but most were not in favour of such a move and opted for giving concessions to the elderly,” stated a member of the GoM.

One member of the second panel stated that “it was not discussed prominently in the meeting” regarding the merging of GST slabs.