GST Council meet: Taxation On Insurance Premium, Rate Rationalisation Key Hopes | Economy News

According to industry sources, the GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, is also likely to discuss the operationalisation of the GST Appellate Tribunal mechanism which is a key step towards streamlining dispute resolution under GST.

The meeting is going to deliberate upon whether to reduce the tax burden on health insurance from the current 18 per cent or exempt certain categories of individuals, like senior citizens. In the last fiscal, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premiums, and Rs 1,484.36 crore on account of GST on health reinsurance premiums.

The meeting is also likely to discuss the reduction of the current four major GST slabs (5 per cent, 12 per cent, 18 per cent and 28 per cent) to possibly three slabs, as per talks which have been ongoing for a while now. According to industry experts, the move could simplify the tax structure and reduce compliance burdens.

Shivashish Karnani, Head of GST at Dewan PN Chopra and Co, said that the current GST rate on life and medical insurance premiums is 18 per cent which further accelerates the affordability issue. Consequently, one of the key expectations from the 54th GST Council meeting is a reduction in tax rates or, ideally, the complete exemption of GST on life and health insurance premiums, he mentioned.

The life and health insurance industry is hopeful that the meeting will result in a significant reduction of the GST rate from 18 per cent to a lower rate such as 5 per cent or even 0.1 per cent. This reduction would alleviate the tax burden on both insurers and policyholders.

Finance Minister Sitharaman said last week that the GST rate is much below the revenue neutral rate (RNR), originally suggested at 15.3 per cent, which means less burden on taxpayers. The current average GST rate has decreased to 12.2 per cent as of 2023, much below the revenue neutral rate in GST, the Finance Minister informed.

The government needs to raise revenue, “but simplifying, easing and ensuring compliance for taxpayers comes first”, she added. The revenue neutral rate is the rate of tax at which the government collects the same amount of revenue even after changes in tax laws.