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Informist, Saturday, Dec. 21, 2024

 

--Bihar Dy CM: Work left on GST rate rationalisation; decision later
--Bihar Dy CM:Need 1 more GoM meet on GST rate rationalisation before report
--Bihar Dy CM: GoM on GST rate rationalisation to meet in January
--Bihar Dy CM:Rate rationalisation GoM report not submitted to GST Council Sat

--Source: Council defers GoM decision to cut GST on life insurance premiums
--Source: Council defers GoM decision to cut GST on health insurance premiums
--CONTEXT: GoM had proposed lowering GST on life, health insurance premiums

 

JAISALMER - The GST Council on Saturday deferred the Group of Ministers' recommendation to lower the 18% Goods and Services Tax imposed on life and health insurance premiums, Bihar Deputy Chief Minister Samrat Choudhary said. The Council needs further discussion on the matter before a final call can be taken, Choudhary, who heads the ministerial panel tasked at looking at the matter, told reporters.

 

The Group of Ministers had recommended the 18% GST levied on the premium on life insurance policies and the premium on health insurance products providing coverage of up to INR 500,000 may be exempted. Recommendations also included lowering the GST on the premium for health insurance coverage above INR 500,000 to 12% or 5%.

 

Informist had exclusively reported on Friday that state and central revenue officers had failed to build consensus on any big-ticket item that was slated for the council meeting. Officers typically meet ahead of the GST Council meeting to discuss and debate the agenda items. "The Council will likely defer all suggestions," an official, who was part of the officers' meeting had told Informist on the condition of anonymity.

 

The panel on insurance premium GST includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. Experts had told Informist that if the GST rate on health and life insurance is reduced from 18% to 5% without the benefit of input tax credit, it could result in the building up of input tax credit at the insurers' end. This, coupled with the apprehension if insurance companies would pass on the price benefit to customers, had kept officers from taking a call on this matter in earlier meetings.

 

Choudhury, who also heads the panel on rate rationalisation, said that this report -- which had rate tweaks proposed on 148 items -- was also deferred and another meeting of the Group of Ministers will likely be convened in January, after which a final report will be submitted to the council. The council, in fact, did not take up the interim report in Saturday's meeting.

 

The deferring of the report by the Group of Ministers on rate rationalisation comes as a major mood dampener as the proposed host of rate rejigs could likely help the governments to raise an additional INR 220 billion per year. The proposed changes aimed to raise taxes on luxury and sin goods, on the one hand, and provide relief on essential items, on the other.

 

The ministerial panel's recommendations included lowering GST on packaged water above 20 litres to 5% from 18%, lowering GST on bicycles costing less than INR 10,000 to 5% from 12% and cutting GST on exercise notebooks to 5% from 12%. The panel also recommended rates on readymade garments may be tweaked to 5% for garments costing up to INR 1,500, 18% for those between INR 1,500 and INR 10,000, and 28% for those above INR 10,000.

 

The six-member Group of Ministers had been asked to recommend trimming the list of items exempt from GST, reassessing tax rates, and correcting inverted duty structures. To net out the negative impact of lowering GST rates, the panel had also suggested increasing the GST on wristwatches priced above INR 25,000 to 28% from 18% and on shoes costing over INR 15,000 to 28% GST from the current 18%.

 

States were already divided on the proposed new GST rate of 35% on sin goods like cigarettes, tobacco and related products, and aerated beverages from the current 28%. As per the panel's report, the four-tier tax slab of 5%, 12%, 18% and 28% will continue and a new rate of 35% may be introduced for a niche category of items that earlier attracted a cess in addition to the GST rate.

 

Sources aware of the GST Council's deliberations also said that the council has taken a call to raise GST on all used cars, including electric vehicles, to 18% from the current 12%. Currently, new EVs are charged a concessional GST rate of 5% and used EVs are charged 12%. The GST on used vehicles is applied only to the supplier's margin – the difference between the selling price and the purchase price or the depreciated value of the vehicle.

 

The council also recommended 5% GST on ready to eat popcorn mixed with salt and spices if not pre-packed and 12% on pre-packed and labelled and 18% on caramel popcorn, a source said.  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Ashish Shirke

 

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