GST Council Meeting: Industry eyes tax relief on health insurance premiums, higher levies on luxury items
Industry experts anticipate a reduction in GST rates on health insurance in the upcoming GST Council meeting, potentially increasing coverage.
Industry experts expect a reduction in GST rates on health insurance at the forthcoming GST Council meeting on December 21, 2024. This could expand health insurance coverage; however, it may also raise concerns for insurance companies.
“The reduction in GST rates of health insurance would lead to a reduction in costs for the common man, helping to promote the coverage of health insurance. However, if health insurance is exempted from GST for all or specified persons, the insurance companies would lose out on input tax credits to that extent and accordingly, the reduction in costs can be less than the amount of GST previously charged,” Karthik Mani, Partner, Indirect Tax, BDO India, said.
The GST Council is a constitutional body that makes recommendations on goods and services taxes to the Centre and the States.
The previous GST Council meeting held on September 9, recommended constituting a Group of Ministers (GoM) to investigate the matter of GST levied on life and health insurance. The GoM was chaired by Samrat Chaudhary, Deputy Chief Minister of Bihar.
The GoM has proposed a GST exemption for health insurance policies up to ₹5 lakhs for senior citizens.
“The proposed changes by the Group of Ministers are seen as a positive move, especially the proposed exemptions for senior citizens' health insurance and term life insurance policies. If this proposal gets approved, it will ease financial burdens on the elderly people and families seeking greater financial security,” Shivashish Karnani, GST Division, DPNC Global, said.
“However, the decision of the council to continue imposing 18% GST on health insurance premiums exceeding ₹5 lakh is sparking concerns. It has been argued that this could raise healthcare costs for middle-class families, particularly for those who have pre-existing conditions or require specialized care,” Karnani added.
GST on other goods
Apart from exempting GST on health insurance, the GoM proposed increasing the GST rate on luxury goods such as watches costing above ₹25,000 from 18 per cent to 28 per cent and shoes over ₹15,000 from 18 per cent to 28 per cent.
“The proposal to levy tax on some of the luxury items, such as watches or shoes costing above the specified value, would help increase tax collection. However, it is hoped that similar to the practice followed for hotels, such tax rates would be linked to the actual sale price and not MRP to avoid complications in the cases where the products are sold at a price lower than the MRP,” BDO India's Mani said.
It is also expected that the GST rate for readymade clothes might also be hiked.
“While the proposal to levy GST on readymade garments in multiple slabs based on price would reduce the accumulation of Income Tax Credit (ITC) for the industry and improve working capital, it would increase the cost of garments for the end consumer,” Mani added.
The GoM also proposed a reduction in the GST rate on pre-packaged drinking water above 20 litres from 18 per cent to 5 per cent and exercise notebooks from 12 per cent to 5 per cent.
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Business NewsEconomyGST Council Meeting: Industry eyes tax relief on health insurance premiums, higher levies on luxury items
First Published:12 Dec 2024, 07:17 PM IST
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