Focus on Insurance GST Exemptions
Union Finance Minister Nirmala Sitharaman will chair the 55th GST Council meeting in Jaisalmer, Rajasthan, on December 21, 2024. A key agenda is deciding on exempting or reducing GST rates on health and life insurance premiums. The Group of Ministers (GoM) on insurance GST has recommended exempting premiums for term life insurance, senior citizens’ health insurance, and health insurance policies with coverage up to ₹5 lakh. However, premiums for policies exceeding ₹5 lakh would continue to attract 18% GST.
Proposed Rate Rationalizations
The Council will also consider recommendations to rationalize GST rates on various goods. Proposed changes include reducing GST on:
Packaged Drinking Water (20L and above):
From 18% to 5%.Bicycles costing below ₹10,000:
From 12% to 5%.Exercise Notebooks: From 12% to 5%.
Additionally, luxury items such as:
Shoes priced above ₹15,000/pair: Increase from 18% to 28%.
Wristwatches priced above ₹25,000: Increase from 18% to 28%.
Context of Rate Adjustments
Currently, GST follows a four-tier tax structure of 5%, 12%, 18%, and 28%, with essential goods taxed at lower rates and luxury items at higher slabs. However, the average GST rate has dipped below the revenue-neutral rate of 15.3%, necessitating discussions on rate rationalization.
GoMs Leading the Initiatives
Bihar Deputy Chief Minister Samrat Chaudhary leads the 13-member GoM on insurance GST and the 6-member GoM on rate rationalization. Their recommendations will be central to the Council’s deliberations.
The decisions from this meeting are expected to impact businesses and consumers, especially in essential and luxury goods markets.
