Following Finance Minister Nirmala Sitharaman’s statement that the debate surrounding GST on insurance premiums would be addressed by the GST Council, the governing body is scheduled to convene next month to discuss the matter. This follows calls from Union Minister of Road, Transport, and Highways Nitin Gadkari to abolish the 18% GST on life and medical insurance premiums, arguing that it unfairly taxes life’s uncertainties and hinders the sector’s growth.
The GST Council’s upcoming meeting will focus on several key issues, including the contentious matter of GST on insurance premiums. This topic has become a political flashpoint, with the opposition raising concerns during the Budget 2024 debate. Sitharaman countered these concerns, emphasizing that even prior to the implementation of GST, states imposed taxes on insurance premiums. She further highlighted that the GST on medical insurance benefits states directly, with nearly half of the collected revenue going directly to them. An additional 41% is allocated to the devolution pool, which also benefits states, meaning over 74% of the collected GST on medical insurance flows back to state coffers.
Another significant topic on the agenda is rate rationalization. Following the previous Council meeting in June, Sitharaman announced that the Group of Ministers (GoM) would present a status report on ongoing rate rationalization discussions. The Council will then move forward with these discussions. However, she cautioned that finalizing a revised rate structure will require time. The seven-member panel responsible for rate rationalization has been tasked with simplifying the rate structure, addressing the inverted duty structure, reviewing the GST exemption list, and boosting revenue generation from the Goods and Services Tax.
The upcoming GST Council meeting is anticipated to be a crucial one, addressing critical issues within the tax system. The discussions on GST on insurance premiums and rate rationalization are likely to generate significant interest and could have far-reaching implications for both businesses and consumers.
