GST on senior citizen health insurance premiums may be exempted

PTI, NEW DELHI, OCT 19, 2024: Term life insurance policies and senior citizens' health insurance premiums are likely to be exempted from GST as most members of a state ministerial panel favored cutting taxes to benefit the common man, an official said on Saturday.

The GoM to decide on GST on health and life insurance premiums in its meeting on Saturday decided to exempt GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh. However, 18 percent GST will continue to be levied for health insurance cover of over Rs 5 lakh.

Separately, the GoM on GST rate rationalization also met on Saturday and suggested that the GST Council rejig tax rates on a host of goods, including packaged drinking water, bicycles, exercise notebooks, luxury wristwatches, and shoes. A final decision on GST on health and life insurance premiums, as well as rate rationalization, is likely to be taken by the GST Council, chaired by the Union Finance Minister and comprising state counterparts, in its meeting scheduled to take place next month.

"The rate rejig exercise will help the states and Centre to realize a revenue gain of Rs 22,000 crore, which will help cover the revenue loss from the reduction in GST rates for insurance premiums," the official added.

The GoM on rate rationalization proposed reducing GST on packaged drinking water of 20 liters and above to 5 percent from 18 percent. If the GoM's recommendation is accepted by the GST council, GST on bicycles costing less than Rs 10,000 will be reduced to 5 percent from 12 percent. Also, GST on exercise notebooks will be reduced to 5 percent from 12 percent.

The GoM also proposed hiking GST on shoes above Rs 15,000 per pair from 18 percent to 28 percent. It also proposed hiking GST on wristwatches above Rs 25,000 from 18 percent to 28 percent.

Talking to reporters after the GoM meetings, Bihar Deputy Chief Minister Samrat Chaudhary, who is the convenor of the health and life insurance GoM, said, "Every GoM member wants to give relief to people. Special focus will be on senior citizens. We will submit a report to the Council. A final decision will be taken by the Council."

Chaudhary, who is also the convenor of the GoM on rate rationalization, said the panel will meet again before submitting its report to the Council. This was the first meeting of the 13-member GoM on health and life insurance premiums, which was set up last month to suggest tax rates.

The panel, which includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana, has been mandated to submit its report to the GST Council by the end of October.

In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premiums, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premiums.

The six-member Group of Ministers (GoM) on GST rate rationalization includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya, and Kerala Finance Minister K N Balagopal. To make up for the revenue loss incurred by lowering the tax rate on goods used by the common man, the GoM also discussed the possibility of raising tax rates on some items, including aerated water and beverages.