Individual life insurance purchases can be exempted from GST, but GST rates on collective life and health insurance purchases can be reduced from 18% to 12% or 5%. Rates can be relaxed on renewal of insurance. The GoM has recommended reducing the GST rate on tobacco products from 28% to 35%.
In the meeting of GST Council to be held on 21 December in Jaisalmer, it is believed that relief from 18 percent GST on purchase of life and health insurance is certain. However, it is doubtful whether this relief will be complete, because if every type of purchase of life and health insurance is completely exempted from GST, both the Center and the State will have to suffer a loss of several thousand crores of rupees.
The state also has a share in the revenue received by the Center. Therefore, only purchase of health insurance up to a certain limit can be completely exempted from GST. This limit can be up to five lakhs. At the same time, any purchase of health insurance by the elderly individually can be exempted from GST.
How much relief will be given in insurance?
Purchase of life insurance individually can be exempted from GST, but the 18 percent GST rates on purchase of life and health insurance collectively can be reduced to 12 or five percent. Relief in rates can be given on renewal of insurance. In the earlier GST Council meeting, the matter of abolishing GST on life and health insurance was referred to the Group of Ministers (GoM) and no decision was taken.
The GoM was also asked to report on rationalizing the GST rates on about 150 products. These items also include footwear and clothes. There are many such items for which there is a lot of difference in the GST rates of raw materials and finished items, due to which there are problems in both taking and giving input tax credit.
When will the decision be taken on insurance relief?
Sources say that the GoM will submit its report in the council meeting on Saturday, but the council cannot take any immediate decision on it. Because the GoM consists of ministers from only five to seven states. Therefore, it is not necessary that other states accept the decision of the GoM. The consent of every state is necessary for a decision in the council.
According to sources, in such a situation, it is difficult to take a decision on rationalizing the GST rates of about 150 items on Saturday. The biggest obstacle in rationalizing the rates can be that no state will quickly agree to a reduction in rates because it leads to loss of revenue. Where there is a recommendation to increase GST rates, it can be easily accepted because it will benefit the states in terms of revenue.
There will be a discussion on increasing tax on tobacco products
The GoM has recommended increasing the GST rate on tobacco products from 28 to 35 percent. This recommendation can be approved, but on Saturday, the council will first discuss this recommendation with the states. Union Finance Minister Nirmala Sitharaman is the chairperson of the GST Council.
