GST Council to decide on cutting taxes on insurance premium, rate rejig on host of items

GST Council to discuss reducing tax rates on insurance, hiking on luxury items, considering 35% tax on sin goods.

The GST Council, in its meeting on Saturday (December 21, 2024), is likely to decide on reducing tax rates on life and health insurance premiums, while hiking it on high-end wrist watches, shoes and apparels, besides considering a separate 35% tax slab for sin goods.

The 55th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising State counterparts, is likely to discuss rate rejig in about 148 items, besides, it will also deliberate on bringing Aviation Turbine Fuel (ATF), a major component for airline industry's operation cost, in the Goods and Services Tax (GST) fold.

The GST rate is also proposed to be cut on food delivery platforms like Swiggy and Zomato, to 5% (without input tax credit), from the current 18% (with ITC).

However, the Fitment Committee (comprising tax officers from the Centre and states) is likely to have proposed a rate hike to 18% on sale of used EVs as well as small petrol and diesel vehicles to 18% from the current 12%. This hike would bring used and old smaller cars and EVs at par with old larger vehicles, according to sources.

Also, the Group of Ministers (GoM) on GST compensation cess is likely to get a six month extension till June, 2025, to submit their report. The compensation cess regime comes to an 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.

In the GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above the 28% tax. The proceeds from the cess, which was originally planned for five years after GST roll-out or till June 2022, was used to compensate States for revenue loss incurred by them post the introduction of GST.

One of the major items on the agenda of the Council is to decide the GST rate on health and life insurance. A GoM set up by the Council under Bihar Deputy Chief Minister Samrat Chaudhary, in its meeting in November had agreed on exempting insurance premiums paid for term life insurance policies from GST.