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GST council sets up GoM to look at tax rates for health insurance
GST Council chairperson Nirmala Sitharaman indicated that the next meeting of the Council may take several key decisions when it will meet during the festive season in November
The Goods and Services Tax Council on Monday constituted a Group of Ministers (GoM) to consider exempting GST on life and medical insurance premia, exempted tax on research funds availed by recognised institutions, reduced levies on cancer drugs and namkeens and announced an early expiration of the compensation cess while hinting that the levy could continue on luxury items such as automobiles in some another form.
Briefing about the decisions of the 54th meeting of the apex federal body on indirect taxes, GST Council chairperson Nirmala Sitharaman indicated that the next meeting of the Council may take several key decisions when it will meet during the festive season in November. Speaking about the GoM set up to consider GST on medical and health insurance, she said the group will be chaired by the deputy chief minister of Bihar, Samrat Chaudhury -- who also heads the GoM on rate rationalisation – but its members will be different.
The GoM is constituted “for the limited purpose of medical and health insurance” related matters and it will “come with a report by the end of October”. And the GST Council will meet in November to take a final call, she said.
After Union minister Nitin Gadkari wrote to the finance minister, requesting to exempt GST on life and medical insurance, several members of parliament (MPs) belonging to the Opposition questioned the rationale of 18% GST on these products in the recently concluded session. Replying to their demand, Sitharaman said that the tax on insurance premia has continued from the previous value-added tax (VAT) regime and assured them that she would take up the matter in the Council.
Explaining the need to create a GoM for this matter, the finance minister said: “There was good discussion. But, the details of the discussion made us feel that there is more to understand… for instance, many resident welfare associations have asked what if they do a group insurance for the residents? What happens to group insurance of companies? What happens to senior citizens? What happens to life insurance as opposed to term insurance?”
Because of the various dimensions that came in during discussion, the Council felt that a GoM may “very quickly” look into it by end of October. If the GoM gives its recommendations in the stipulated time, the November meeting of the Council could take a call, she added. The Council is headed by Union finance minister and state FMs are its members. Barring one occasion, all its decisions have been unanimous since the new tax regime was rolled out in July 2017.
Speaking about other decisions taken in the meeting, Sitharaman said the Council slashed tax rates on cancer drugs from 12% to 5% and namkeens from 18% to 12%. The cancer drugs are --Trastuzumab Deruxtecan, Osimertinib and Durvalumab. While GST on extruded or expanded namkeens, bhujia, mixture, and chabena (pre-packaged and labelled) was reduced, the tax rate of 5% continues on un-fried or un-cooked snack pellets, a spokesperson said.
The Council on Monday clarified that GST on car seats has been raised from 18% to 28% on a par with seats of motorcycles. On services, key decisions include reduction of helicopter rides from 18% to 5% on seat-share basis. Chartering of helicopters will, however, continue to attract 18% GST.
Stating how Prime Minister Narendra Modi prompted her to exempt GST on R&D funding, Sitharaman said the Council unanimously recommended to exempt supply of research and development services by a government entity; or public of private research institution already enjoying the income-tax exemption. “I’m grateful to the Council for unanimously supporting this proposal,” she said, adding that the first support came from the FM of West Bengal.
HT on March 20, 2024 wrote that GST compensation cess may end before the March 2026 deadline but the Centre and states may consider continuing higher duties on these items in some other form. The compensation cess is levied on sin goods and luxury items such as liquor, automobiles, aerated water, coal, cigarettes and other tobacco products.
Officials said the Council on Monday also deliberated on the status report of raising GST on online gaming but did not relent to the industry demand to review it. Sitharaman said the GST revenue from online gaming alone saw a 412% jump in just six months to ₹6,909 crore since October 1, 2023 when a 28% tax was levied on these services. The jump was from ₹1,349 crore revenue collected in six months before October 1, 2023.
The Council in 2023 decided to levy 28% GST on the full-face value of bets in casinos, race courses and online games from October 1, after necessary legislative changes, and agreed to review the impact of the move in six months on requests from smaller states and the industry.
