Mint Quick Edit | Is a GST rate cut for insurance good news?

Any agreement is a good sign. Yet, it also reminds us of how far India’s GST regime has veered from its conceptual principles. (PTI)
Any agreement is a good sign. Yet, it also reminds us of how far India’s GST regime has veered from its conceptual principles. (PTI)

Summary

  • It’s good that the GST Council has reportedly reached a consensus on slashing this tax rate on life and health insurance premiums. But rate multiplicity and frequent tweaks go against reformist ideals.

Anticipation of a cut in the 18% goods and services tax (GST) levied on life and health insurance premiums hit a fresh peak on Monday, as news emerged of a likely consensus at the GST Council on offering such relief.

Also read: GST Council Meeting Live Update: GST on Cancer drugs reduced to 5%, no GST on funds given to Central or State university

The applicable rate could be reduced to 5%, a slab meant for merit items, although a final decision was reportedly held off for the Council’s next meeting. 

Any agreement is a good sign, given that this body is chaired by the Union finance minister but has members from states that don’t always see eye-to-eye with the Centre. Yet, such news also reminds us of how far India’s GST regime has veered from its conceptual principles.

Also read: GST to incentives: Centre working on plan to reduce ATF prices

A key benefit of this momentous tax reform was supposed to be a drastic reduction in the scope for policymakers to fiddle with rates, so that the system is kept insulated from the advocacy of lobby groups.

Ideally, we should’ve had a single rate for most items, with merit and demerit slabs for a few items that clearly deserve distinctive treatment.

Also read: Aviation industry upset over jet fuel prices, seeks tax sops

Insurance would be in a grey zone by this reckoner, arguably. But then, since many other taxables seem out of place in their assigned slabs, it’s best to look at the bright side of it: cheaper risk cover.

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