The much-anticipated 55th GST Council meeting is set to address a range of pressing issues across diverse sectors on December 21, 2024. From revising GST rates on insurance premiums to potential tax relief for essential services like food delivery, this meeting is expected to have a significant impact on consumers and industries alike.
Key Agenda Items for the GST Council Meeting
- Insurance Premium Adjustments:
- Proposed Changes: The Council may streamline GST rates on insurance premiums, focusing on reducing tax burdens for senior citizens and specific insurance policies such as health insurance with a coverage of ₹5 lakh and term life insurance.
- Current GST Rates:
- Health insurance, term life insurance, and unit-linked insurance plans: 18%.
- Endowment plans: 4.5% GST in the first year, 2.25% from the second year.
- Single premium annuity life insurance policies: 1.8%.
- Potential Relief: Exemptions for micro-insurance and senior citizen health insurance policies have been suggested.
- Food Delivery Services and Essential Items:
- Possible Reductions: A proposal to lower GST on essential services such as food delivery, packaged drinking water, and bicycles aims to reduce the tax burden on everyday consumers.
- Luxury Goods and High-End Products:
- Rate Increases Expected:
- Items like wristwatches, expensive shoes, and high-end readymade garments may see higher GST rates as part of the pricing-based tax differential.
- Rate Increases Expected:
- Aviation Turbine Fuel (ATF):
- Inclusion in GST Regime: A significant discussion will revolve around bringing ATF under the GST framework. This move could:
- Create uniform taxation across states.
- Enable airlines to claim Input Tax Credit (ITC) on ATF, reducing operational costs.
- Inclusion in GST Regime: A significant discussion will revolve around bringing ATF under the GST framework. This move could:
- Automotive Sector:
- Proposed Rate Hikes:
- GST on 148 items, including pre-owned EVs and compact petrol and diesel vehicles, may increase from 12% to 18%. The potential impact on the automotive industry and buyers will be closely monitored.
- Proposed Rate Hikes:
Insurance Premiums: A Spotlight on the Proposals
The GST structure for insurance premiums is expected to see critical changes, with the Insurance Regulatory and Development Authority of India (IRDAI) backing the proposal. Key highlights include:
- GST Exemption:
- Senior citizen health insurance.
- Micro-insurance policies.
- Term life insurance with specific coverage limits.
- Global Comparisons:
- Developed regions like the European Union and Canada do not impose GST on insurance products. This serves as a model for potential tax exemptions in India.
- Healthcare Disparities:
- Medical services in India are tax-exempt, but insurance premiums incur GST. Addressing this inconsistency could make health insurance more accessible to marginalized groups.
Impact on Consumers and Industries
- Consumers:
- Lower Costs: Potential reductions in GST on food delivery, insurance premiums, and essential goods could ease household expenses.
- Higher Expenses: Luxury goods and specific automotive items might become pricier with increased GST rates.
- Industries:
- Aviation: Inclusion of ATF under GST could streamline operations and reduce costs.
- Insurance: Tax relief for specific policies may boost adoption, particularly among senior citizens and lower-income groups.
Conclusion
The 55th GST Council meeting holds the promise of crucial reforms that aim to balance fiscal objectives with the needs of consumers and industries. While proposed exemptions and rate reductions could bring relief to some sectors, increased rates on luxury items may offset these benefits. As the meeting unfolds, all eyes will be on the Council’s decisions and their broader economic implications.
Disclaimer:
This article is for informational purposes only. It does not constitute financial, legal, or tax advice. Readers are advised to consult with qualified professionals for personalized guidance.
Click here to know more.
