GST Council to Review 18% Tax on Insurance Premiums by October
The Goods and Services Tax (GST) Council has decided to reassess the 18% tax levied on health and life insurance premiums, with a deadline set for October. This decision comes amid growing demands for a reduction or removal of the tax.
Union Finance Minister Nirmala Sitharaman announced, "We decided there is a need for a rigorous review, and it might be worth a GoM to look into these issues quickly by the end of October. The GST Council will meet again in November to take a call on it." She acknowledged that various concerns have arisen, including whether the tax rate should be reduced, whether the GST levy should be scrapped altogether, and how group insurance policies might be treated.
The Council also updated its work on GST rate rationalisation, including the status of the ministerial group formed three years ago to review GST rates and slabs. The panel on rate rationalisation is scheduled to meet on September 23 to discuss its broader mandate.
Additionally, a new ministerial group will review the future of the GST Compensation Cess, which was initially set to be levied until July 2022 to compensate States for revenue losses in the first five years of GST. This levy has been extended until March 2026 due to a dip in cess collections during the COVID-19 pandemic. Sitharaman noted, "Consumers would hope for a reduction or dropping of the cess altogether after the special borrowings are repaid. The GoM will assess if it may continue in some form other than a 'Compensation Cess' and examine some States’ concerns about not getting adequate compensation."
The Council approved several rate adjustments:
- The GST rate on three cancer drugs—Trastuzumab Deruxtecan, Osimertinib, and Durvalumab—will be reduced from 12% to 5%.
- The GST rate on car seat covers will be increased from 18% to 28%, aligning it with the rate for motorcycle seats.
- The tax on some extruded savoury snacks will be reduced from 18% to 12%.
The Council also addressed issues related to real estate. Revenue Secretary Sanjay Malhotra stated that the GoM has been asked to consider how land costs should be factored into the value of construction services. The Council is also working to resolve issues related to GST demands on universities for research funds and taxes sought from foreign airlines for services through their branch offices. Sitharaman clarified, "Funds given for research to State-affiliated universities, or those that have come about under State or Central laws, or those that have obtained Income Tax exemption, can receive research funds both from the public sector and private sectors and will be exempt from paying GST."