NEW DELHI: The GST Council, which is set to meet in Rajasthan on Dec 21-22, will decide on slashing the levy on term insurance plans from 18% to zero, along with creating a similar dispensation for health covers for senior citizens as well as those purchasing insurance up to Rs 5 lakh.
A decision on rate rationalisation for other goods and services is, however, unlikely in the meeting in the desert as states are yet to firm up their proposal amid concerns of revenue loss among several of them, especially Kerala and West Bengal, which are otherwise critical of the “high levies”.
Most of the non-NDA governed states have opposed a reduction in the number of slabs from four to three. Currently, goods and services are taxed at 5%, 12%, 18% and 28% with the top two accounting for three-fourths of the revenue.
In fact, concerns over revenue loss have also come in the way of an across-the-board reduction in GST on health insurance as it generates around Rs 2,500 crore revenue and states are wary of losing any money now as the Centre is no longer there to compensate them. A group of ministers headed by Bihar deputy CM Samrat Chaudhary has already firmed up the proposal on health insurance, the least contentious of the three issues on the table. A third ministerial panel led by minister of state for finance Pankaj Chaudhary is looking at the future of compensation cess but a decision on that will be taken only towards the end of 2025 since the levy on luxury and sin goods is applicable until March 2026.
When it comes to rate rationalization, the plan discussed was to focus on reduction in mass consumption items while increasing the levy on “luxury products” such as high-end shoes.
