ADVERTISEMENT

GST Meeting Preview: Key Decisions On Tax Rates For Insurance, Luxury Items, Food Delivery Platforms

Key agenda points include discussions on a separate 35% tax slab for sin goods, rate rejig in about 148 items, and the potential inclusion of aviation turbine fuel under the GST framework.

<div class="paragraphs"><p>The Goods and Services Tax&nbsp; (GST) Council is likely to make pivotal decisions on tax reforms during its 55th meeting on Saturday (Source: Freepik)</p></div>
The Goods and Services Tax  (GST) Council is likely to make pivotal decisions on tax reforms during its 55th meeting on Saturday (Source: Freepik)

The Goods and Services Tax Council is likely to make pivotal decisions on tax reforms during its 55th meeting on Saturday.

Chaired by Finance Minister Nirmala Sitharaman and comprising state counterparts, the council will consider reducing GST rates on life and health insurance premiums, while proposing hikes on luxury items like high-end wristwatches, shoes and apparel.

Key agenda points include discussions on a separate 35% tax slab for sin goods, rate rejig in about 148 items, and the potential inclusion of aviation turbine fuel under the GST framework.

The GST rate is also proposed to be cut on food delivery platforms like Swiggy and Zomato to 5% without input tax credit from the current 18% (with ITC).

However, the fitment committee, comprising tax officers from the Centre and states, is likely to have proposed a rate hike to 18% on sale of used EVs as well as small petrol and diesel vehicles to 18% from the current 12%. This hike would bring used and old smaller cars and EVs at par with old larger vehicles, according to sources.

Opinion
GST Council Likely To Discuss 5% GST On Zomato, Swiggy, Other Food Delivery Services

Also, the group of ministers on GST compensation cess is likely to get a six-month extension till June, 2025, to submit their report. The compensation cess regime comes to an end in March, 2026, and the GST Council has set up a panel of ministers, under Minister of State for Finance Pankaj Chaudhary, to decide the future course of the cess.

In the GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above the 28% tax. The proceeds from the cess, which was originally planned for five years after GST roll-out or till June 2022, was used to compensate states for revenue loss incurred by them post the introduction of GST.

One of the major items on the agenda of the Council is to decide the GST rate on health and life insurance. A GoM set up by the Council under Bihar Deputy Chief Minister Samrat Chaudhary, in its meeting in November had agreed on exempting insurance premiums paid for term life insurance policies from GST. Also premium paid by senior citizens towards health insurance cover has been proposed to be exempted from the tax.

Besides, the GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh is proposed to be exempted. However, 18% GST will continue on premiums paid for policies with health insurance cover of over Rs 5 lakh.

Another major item before the Council is the GST rate rationalisation panel's report, which has suggested rate tweaks in 148 items.

The GoM on GST rate rationalisation earlier this month decided to submit before the Council their recommendation to hike tax on sin goods, like aerated beverages, cigarettes, tobacco and related products, to 35% from the present 28%.

The four-tier tax slab of 5, 12, 18 and 28% under GST will continue and a new rate of 35% is proposed by the GoM only for sin goods.

Opinion
GST Rate Rationalisation, Insurance Tax Cuts On Agenda As Panels Meet This Saturday

The Group of Ministers on rate rationalisation under the Bihar deputy chief minister also decided to propose rationalising tax rates on apparel.

As per the decision, ready-made garments costing up to Rs 1,500 would attract 5% GST, those between Rs 1,500 and Rs 10,000 would attract 18%. Garments costing above Rs 10,000 would attract 28% tax.

Currently, garments costing up to Rs 1,000 attract 5% GST, while those above that attract 12%.

The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18% to 28%. It also proposed hiking the GST rate on wrist watches above Rs 25,000 from 18% to 28% in the previous meeting on Oct. 19.

The GoM had proposed reducing GST on packaged drinking water of 20 litre and above to 5% from 18%, and reducing tax rate on bicycles costing less than Rs 10,000 to 5%, from 12%. Also, GST on exercise notebooks would be reduced to 5% from 12%.

In total, the GoM on rate rationalisation has proposed tax rate tweaks in 148 items to the GST council. "The net revenue impact of rate rejigs will be positive," an official had said earlier.

Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury goods like cars, washing machines, and demerit goods like aerated water and tobacco products attract cess on top of the highest 28% slab.

With regard to bringing the ATF in GST, the council is likely to deliberate the timeline and build consensus among states.

When GST was introduced on July 1, 2017, amalgamating over a dozen central and state levies, five commodities — crude oil, natural gas, petrol, diesel and ATF — were included in GST law, but it was decided that it would be taxed under GST at a later date.

This meant that the central government continued to levy excise duty on them, while state governments charged VAT. These taxes, with excise duty, in particular have been raised periodically.

Including oil products in GST will not just help companies set off tax that they paid on input but will also bring about uniformity in taxation on the fuels in the country. Including ATF in GST has been a key ask by the aviation companies from the Finance Ministry, which the companies say would reduce cost as they can claim input tax credit.

(With inputs from PTI)

Opinion
GST Council Meeting: Centre-State IGST Panel To Address Negative Balance Issue
OUR NEWSLETTERS
By signing up you agree to the Terms & Conditions of NDTV Profit