GoM to decide on tax on health, life covers soon

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Last Updated11/09/2024

Goods and Services Tax (GST) Council on Monday set the stage for a possible rethink by mandating a stiff 50-day deadline for a new Group of Ministers (GoM) to review the tax rate

In response to rising demands for a reduction in the 18% GST levy on premiums for health and life insurance policies, the GST Council has tasked a new Group of Ministers (GoM) with reviewing the tax rates.
The GoM has been given a 50-day deadline to complete its assessment, aiming for a decision in the November Council meeting.

Union Finance Minister Nirmala Sitharaman chaired the meeting, where State Ministers raised questions on whether the GST rate should be reduced, scrapped, or exemptions granted.
The Council will examine how group insurance policies should be treated and whether a reduced tax rate or exemption is appropriate.
Broader Rate Rationalisation
The Council was updated on the work of a three-year-old ministerial group tasked with rationalizing GST rates.
This panel will now also address the taxation of insurance policies. The group will meet again on September 23 to discuss the overall rate structure.

The Council also formed a new GoM to deliberate on the future of the GST Compensation Cess. Initially levied to offset states' revenue losses during GST’s first five years, this cess was extended until March 2026 due to the pandemic's impact on collections.
The GoM will assess whether the cess should continue in some form after the special borrowings are repaid by 2025-26.

Cancer Drugs: The GST on three cancer drugs (Trastuzumab Deruxtecan, Osimertinib, and Durvalumab) was reduced from 12% to 5%.
Car Seat Covers: The levy on car seat covers was increased from 18% to 28% to align with taxes on motorcycle seats.
Savoury Snacks: The GST on certain extruded savoury snacks was lowered from 18% to 12%, harmonizing their tax treatment with Namkeens and Bhujia.

The Council discussed real estate issues, particularly the valuation of construction services. Currently, one-third of construction costs are attributed to land, exempting it from GST.
However, the GoM will review whether land costs should be assessed differently based on location.

Universities and Research: The Council resolved a taxation issue concerning research funding for universities. GST will not apply to funds provided to State-affiliated universities and those under Central or State laws. This exemption will apply to both public and private sector funding.
Foreign Airlines: A policy shift exempts foreign airlines from GST on services provided through their Indian branches, aligning them with the concessions granted to Indian airlines operating abroad.