GoM Weighs GST Exemption On Life And Health Insurance Premiums
The GoMs on rate rationalisation, insurance taxation and compensation cess will over two days deliberate on the Centre's 'next-gen' GST reforms, under which tax will be levied at 5% and 18% rates.
A group of ministers has begun deliberations on a proposal to exempt life and health insurance premiums from goods and services tax, sources told NDTV Profit.
The Centre has proposed scrapping the existing 18% GST levied on insurance premiums paid by individuals. The measure is aimed at making insurance products more affordable and boosting penetration.
During the discussions, some states expressed revenue concerns and differing views on the proposal. Questions were also raised over whether the benefit of GST relief on premiums would be passed on to consumers. Telangana Deputy Chief Minister cautioned that such an exemption could result in a revenue loss of around Rs 9,700 crore.
On the issue of compensation cess, no alternative mechanism for supporting states was discussed. The GoM will deliberate separately on the matter of compensation. Punjab, meanwhile, claimed that it suffers a revenue loss of Rs 21,000 crore annually.
With the compensation cess regime unlikely to extend beyond October, the Centre is expected to repay the back-to-back loans to states by then.
This was confirmed by Bihar Deputy Chief Minister Samrat Choudhary on Wednesday when he was talking to the reported.
The issue will ultimately be placed before the GST Council, which will take the final call, people in the know told NDTV Profit. They added that the GoM meeting focused primarily on tax relief for life and health insurance policies.
This comes after Finance Minister Nirmala Sitharaman presented to the GoMs her government's plans for sweeping reforms in the GST regime that involves slashing tax rates and easing compliance burden for businesses.
The GoMs on rate rationalisation, insurance taxation and compensation cess will over two days deliberate on the Centre's 'next-gen' GST reforms, under which tax will be levied at 5% and 18% rates. A special 40% rate has been proposed on five-seven items, including sin goods.
GST is currently levied at 5%, 12%, 18% and 28%. While food and essential items are either at nil or 5%, luxury and demerit goods are at 28% slab, with a cess on top of it.
Day two of the GoM’s meeting is expected to focus on possible GST rate reductions and addressing inverted duty structures.
