NEW DELHI: The upcoming 55th meeting of GST Council on Saturday, chaired by Union Finance Minister Nirmala Sitharaman and attended by state finance ministers, is expected to bring clarity on several key issues, with a potential focus on reducing taxes for life and health insurance premiums.
However, broader tax rate changes, including significant hikes on sin goods like tobacco and aerated beverages, may face delays due to the need for consensus.
Among the proposals under consideration is a landmark decision to exempt GST on term life insurance premiums and health insurance premiums paid by senior citizens.
For individuals below 60, the exemption may apply to premiums for health coverage up to Rs5 lakh. The move, championed by a Group of Ministers (GoM) led by Bihar Deputy Chief Minister Samrat Chaudhary, has gained significant traction among states and is likely to be finalised.
GST on ATF
Another significant agenda item is the inclusion of Aviation Turbine Fuel (ATF) under the GST framework. ATF, a key cost component for the aviation sector, has been a long-standing demand from industry stakeholders.
While the Council is expected to deliberate on the matter, any resolution might take longer as it requires alignment with the Centre and states’ revenue interests.
Tax rate adjustments for food delivery platforms like Swiggy and Zomato are also on the table. A proposal to lower the GST rate to 5 per cent (without input tax credit) from the current 18 per cent (with ITC) could make services more affordable for consumers.
Conversely, a hike in GST rates for used electric vehicles (EVs) and small petrol/diesel cars from 12 per cent to 18 per cent has been proposed by the Fitment Committee to align them with the rates on larger vehicles.
The GoM on GST rate rationalisation, which has reviewed 148 items, is expected to defer its big-ticket recommendations for further discussion. One such proposal includes raising the GST rate on sin goods, such as aerated drinks and cigarettes, to 35 per cent from the existing 28 per cent.
Tax on sin goods
While the GoM has suggested this new rate exclusively for sin goods, the Council is likely to retain the four-tier GST structure of 5 per cent, 12 per cent, 18 per cent, and 28 per cent for other items.
Additionally, the Council is expected to extend the tenure of the GoM on GST compensation cess by six months until June 2025. This extension would provide more time to finalise recommendations on the cess, which currently funds states for revenue shortfalls caused by the GST rollout. The cess, levied on luxury and demerit goods, is set to end in March 2026.
The Council’s discussions will shape critical aspects of India’s tax regime, balancing industry demands, consumer affordability, and the fiscal needs of both the Centre and states.
With major decisions like insurance tax exemptions gaining traction, Saturday’s meeting could mark a step toward easing the tax burden for consumers while deferring contentious issues requiring broader consensus.
