GST Council Meets to Decide On ATF Inclusion, Lower Taxes On Insurance Policies

Jaisalmer: The 55th GST Council meeting, expected to decide on reducing the tax rate on health and life insurance, besides considering rate rejigs on 148 items, began on Saturday. The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising her state counterparts, is also expected to deliberate on bringing Aviation Turbine Fuel (ATF) into the Goods and Services Tax fold. One of the major items on the agenda of the Council is to decide the GST rate on health and life insurance. In a meeting in November, a Group of Ministers (GoM) set up by the Council under Bihar Deputy Chief Minister Samrat Chaudhary had agreed to exempt insurance premiums paid for term life insurance policies from GST.

Also, premiums paid by senior citizens toward health insurance coverage have been proposed to be exempted from the tax. Besides, GST on premiums paid by individuals other than senior citizens for health insurance with coverage of up to Rs 5 lakh is proposed to be exempted. However, 18 per cent GST will continue on premiums paid for policies with health insurance cover of over Rs 5 lakh. A final decision on the insurance taxation under GST is likely on Saturday as most states are in favour of lowering taxes on premiums to give relief to the common man. Several proposals of the Fitment Committee, comprising the Centre and state GST department officials, would come up for review before the Council. One of the proposals includes cutting taxes on food delivery platforms like Swiggy and Zomato to 5 per cent (without input tax credit) from the current 18 per cent (with ITC).

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It is likely to have proposed a rate hike on the sale of used EVs and small petrol and diesel vehicles to 18 per cent from the current 12 per cent. According to sources, this hike would bring used and old smaller cars and EVs at par with old larger vehicles. Also, the GoM on GST compensation cess will likely get a six-month extension to submit their report until June 2025. The compensation cess regime will end in March 2026, and the GST Council has set up a panel of ministers under Union Minister of State for Finance, Pankaj Chaudhary, to decide the future course of the cess.

GST Council Reviews Rate Rationalisation Proposals

Another major item before the Council is the GST rate rationalisation panel's report, which has suggested rate tweaks in 148 items. Earlier this month, the GoM decided to share their recommendations to hike tax on sin goods, like aerated beverages, cigarettes, tobacco and related products, to 35 per cent from the present 28 per cent. The four-tier tax slab of 5, 12, 18 and 28 per cent under GST will continue, and a new rate of 35 per cent has been proposed by the GoM only for sin goods. The GoM also decided to propose rationalising tax rates on apparel. As per the decision, ready-made garments costing up to Rs 1,500 would attract 5 per cent GST, and those between Rs 1,500 to Rs 10,000 would attract 18 per cent. Garments costing above Rs 10,000 would attract a 28 per cent tax. Currently, garments costing up to Rs 1,000 attract 5 per cent GST, while those above that attract 12 per cent.

The 55th GST Council meeting is set to review tax cuts on health and life insurance, food delivery platforms, and propose changes to GST rates on

148 items, including used vehicles, sin goods, apparel, and bicycles, with a focus on lowering premiums for health insurance and extending GST compensation cess reporting.

The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18 per cent to 28 per cent. It also proposed hiking the GST rate on wristwatches above Rs 25,000 from 18 per cent to 28 per cent. "Some of the low-hanging fruits in the 148 items that the rate rationalisation panel has suggested may be decided in the meeting. But, no major big-ticket rate rationalisation is expected," an official said. 

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When asked about his views on rate rationalisation and whether he is in favour, Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said, "Taxation system should be more flexible and not be a burden on people. We will present our views." 

The GoM had proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent and reducing tax rate on bicycles costing less than Rs 10,000 to 5 per cent from 12 per cent. Also, GST on exercise notebooks would be reduced to 5 per cent from 12 per cent.