GST Council to Discuss Insurance Premium Tax in Upcoming Meeting
The GST Council is expected to meet next month to address the issue of Goods and Services Tax (GST) on insurance premiums. Finance Minister Nirmala Sitharaman recently mentioned that this topic will be on the agenda.
Background and Concerns
Union Minister for Road, Transport, and Highways Nitin Gadkari had previously requested the removal of the 18% GST on life and medical insurance premiums. He argued that this tax burdens people with the uncertainties of life and hinders the growth of the insurance sector.
Preparation for the Meeting
Various committees will gather input from different groups to prepare proposals for the GST Council. These proposals will then be reviewed and recommendations will be made for the Centre, States, and Union Territories to implement.
Debate and Political Context
The issue of GST on insurance premiums has been a topic of political debate. During discussions on Budget 2024, the Opposition raised concerns about this tax. Sitharaman responded by pointing out that States have always taxed insurance premiums, even before GST was introduced.
Allocation of Insurance Premium Tax
Sitharaman clarified that from the 18% GST on medical insurance, nearly half goes directly to the States. Of the remaining amount, 41% is added to the devolution pool, which also benefits the States. This means that more than ₹74 of every ₹100 collected from this tax goes to the States, countering claims that the Centre keeps the funds.
Ongoing Discussions
Sitharaman noted that the GST Council has already discussed the GST on insurance premiums three times, but the debate continues. Another important topic for the upcoming meeting is rate rationalization. At the last Council meeting in June, Sitharaman mentioned that a Group of Ministers (GoM) would provide a status report on rate rationalization efforts. This process is ongoing and will take time to finalize.
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Future Steps
The seven-member panel assigned with this task is working on simplifying the rate structure, reviewing the GST exemption list, and improving GST revenue collection.
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