On October 19, the Group of Ministers (GoM) on GST rate rationalization made several key decisions aimed at providing relief to consumers. They proposed exempting health insurance premiums for coverage up to Rs 5 lakh and term life insurance premiums from GST. Additionally, the GoM recommended lowering the GST rate on 20-litre packaged drinking water bottles, bicycles, and exercise notebooks to 5%, while suggesting an increase in tax rates for high-end wristwatches and shoes above Rs 15,000 and Rs 25,000, respectively, raising them from 18% to 28%.
The decisions, led by Bihar Deputy Chief Minister Samrat Chaudhary, are expected to generate a revenue gain of Rs 22,000 crore. The GoM indicated that the exemption on health insurance premiums would apply to all individuals, including family plans, while seniors may benefit from no GST on their insurance premiums, regardless of the coverage amount. Currently, term life insurance premiums are taxed at 18%.
Chaudhary emphasized the GoM’s commitment to providing relief, particularly for senior citizens, stating that a report will be submitted to the GST Council for a final decision. If approved, GST on packaged drinking water and bicycles costing less than Rs 10,000 would decrease from 18% to 5%.
The GoM had previously discussed tax adjustments on over 100 items, considering lowering taxes on certain goods from 12% to 5% to alleviate financial pressure on consumers. Items in the 18% slab, like hair dryers and beauty products, could potentially return to the 28% bracket based on ongoing evaluations.
The six-member GoM includes representatives from several states, including Uttar Pradesh, Rajasthan, Karnataka, and Kerala. Last month, the GST Council established a 13-member GoM to assess taxes on health and life insurance premiums. Currently, the GST framework operates with four tax slabs: 5%, 12%, 18%, and 28%, where essential items are either exempt or taxed at lower rates, while luxury goods incur the highest tax rates along with additional cess.
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