GST Panel considers GST Rate Cut on Medicines, Tractors and Insurance amid Revenue Concern

The ministerial-level committee formed to simplify GST rates could give significant relief to consumers. GST rates for various medicines, insurance, and tractors are scheduled to drop to 5% by next month.

Tractors currently attract either 12% or 28% GST, depending on their categorization. The lower revenue from tractors can be offset by raising the GST rate on expensive electric vehicles (EVs).

There is also a prospect of lowering GST rates for health and term insurance. The GST on health insurance can be decreased from 18% to 12%, while term insurance is projected to collect 5% GST.

Though the demand for zero GST on term insurance has been increasing for some time, insurance companies may lose their input tax credit. Hence, the suggestion of 5% GST on term insurance is considered appropriate.

According to a report, the ministerial committee is opposed to reducing GST rates from four to three. However, it may minimize the number of items subject to 12% GST. Some things may be placed in the 5% slab, while others might be moved to the 18% slab.

The committee will publish its recommendations by the end of October. A meeting will be convened on October 19 to consider GST rates for insurance. Another meeting has been set for October 20 to examine rate rationalization items in detail.

While several state finance ministers have consented to the three slab structure, states such as Kerala, Karnataka, and West Bengal prefer to keep the current rates.

According to sources, Kerala Finance Minister K N Balagopal is hesitant to reduce GST rates due to the state’s poor financial situation.