Jaisalmer- A GST Council meeting on Saturday postponed a decision on reducing taxes on health and life insurance, while the much talked- about GoM recommendation of rate rejig in 148 items was not tabled before the Council.
Some members of the Council, chaired by Union Finance Minster Nirmala Sitharaman and comprising her state counterparts, felt that more deliberations were required before a final decision could be arrived at with regard to insurance taxation.
Bihar Deputy Chief Minister Samrat Chaudhary, who heads the panel on GoM on insurance, said one more meeting is required to take a call on taxation of group, individual, senior citizen’s policies.
“Some (Council) members said more discussions required. We (GoM) will meet in January again,” Chaudhary told reporters here.
Besides, the report of the GoM on rate rationalisation, which had recommended tweaks in 148 items, was not tabled before the Council.
“We will submit the GoM report on rate rationalisation in next meeting of Council,” said Chaudhary who is the convenor of the panel.
The ongoing Council meeting will also deliberate on bringing Aviation Turbine Fuel (ATF) in Goods and Services Tax fold.
Several proposals of Fitment Committee, comprising officials from the Centre and states’ GST departments would come up for review before the Council.
One of the proposals include 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).
It is likely to have proposed a rate hike on sale of used EVs as well as small petrol and diesel vehicles to 18 per cent from the current 12 per cent. 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.
The GoM on insurance had recommended exempting insurance premiums paid for term life insurance policies from GST. Also premium paid by senior citizens towards health insurance cover has 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.
The GST rate rationalisation GoM report, which has suggested rate tweaks in 148 items, was not tabled before the Council and would be taken up in next Council meeting.
The GoM earlier this month had arrived at a consensus to hike tax on sin goods, like aerated beverages, cigarettes, tobacco and related products, to 35 per cent from the present 28 per cent.
Currently, GST is a four-tier tax structure with slabs at 5, 12, 18 and 28 per cent. Luxury and demerit goods are taxed at highest bracket of 28 per cent, while packed food and essential items are at the lowest 5 per cent slab.
The GoM had 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, those between Rs 1,500-10,000 would attract 18 per cent. Garments costing above Rs 10,000 would attract 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 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 wrist watches above Rs 25,000 from 18 per cent to 28 per cent.
The GoM had proposed reducing GST on packaged drinking water of 20 litre 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.
GST At 18% On Used EV Car Sale By Business; ATF Stays Out Of Its Ambit
The goods and services tax council on Saturday decided to levy an 18 per cent GST on margin value on sale of used electric vehicles by businesses and agreed to keep jet fuel (ATF) out of the ‘one-nation-one-tax’ regime.
The GST Council in its 55th meeting also decided to clarify on taxability of popcorn, saying caramelised popcorn will continue to attract tax at the rate of 18 per cent. However, pre-packed and spiced popcorn will attract 12 per cent, while 5 per cent will be levied on unpacked and unlabelled ones.
It has been decided to regularise the issues for the past on “as is where is” basis… “It is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation,” an official statement said.
The panel, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and UTs, deferred decisions on reducing tax rate on insurance products as also on levy of the tax on food delivery by aap-based platforms.
The panel cut the tax rate on fortified rice kernels used for public distribution to 5 per cent from 18 per cent, Sitharaman told reporters after the meeting of the Council here.
The Council also decided that no GST will be payable on penal charges levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.
The panel deferred a decision on reducing the rate of tax on insurance premium, pending comments of the sector regulator, she said.
A group of ministers examining the issue had recommended exempting insurance premiums paid for term life insurance policies from GST and premium paid by senior citizens for health insurance cover. It had also suggested GST exemption on premium paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh.
Alongside, the GoM on rate rationalisation, which is looking at tweaking rates on 148 items, will be given more time to arrive at a decision.
The finance minister said the council decided to raise the rate of tax to 18 per cent from 12 per cent on all used EV sales, just as in case of non-electric vehicles, and it will be applicable only on the value that represents margin – the difference between the purchase price and selling price (depreciated value if depreciation is claimed) – by businesses.
Sale and purchase of used vehicles by individuals will continue to be exempt from GST.
Without naming any state, she said the states wanted to continue to keep aviation turbine fuel (ATF), used in aircrafts, out of the goods and services tax (GST).
When the GST subsumed more than a dozen central and state levies into GST in July 2017, five products – crude oil, petrol, diesel, ATF and natural gas – were kept out of its purview. The central government levies excise duty on them and states levy VAT.
“Every state clearly said that ATF should not come into GST… States did not feel comfortable” to include ATF under the GST, she said.
She said black pepper and raisins when supplied by an agriculturalist is not liable to GST payment.
GoM on health insurance requires more work, she said, adding the same was the case with rate rationalisation GoM.
“No report (on rate rationalisation) has been finalised,” she said.
The GoM on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, has been given an extended deadline to submit its report. The earlier deadline was December 31, 2024.
On small companies facing registration problems, she said a concept note has received in-principle approvals. This may require amendments to be made to the GST Acts to make it easier for small companies to register.
The Council also decided to set up a Group of Ministers to mull over allowing states to levy cess under GST to overcome financial distress after natural calamities.
Finance ministers of Uttar Pradesh, Telangana and West Bengal would be part of the GoM.
The Council decided to form the GoM after Andhra Pradesh sought Council’s approval to levy 1 per cent cess to overcome financial distress post flood in the state.
No decision was taken on levy of tax on delivery charges by quick commerce and food delivery platforms. “This has been deferred,” she said, adding the Fitment Committee will again review it and the issue being debated is if the tax should be equivalent to 5 per cent GST levied on food or more.
GST Council Meeting Takes Key Decisions To Support Small-Scale Sector
The 55th meeting of the Goods and Services Tax (GST) Council held in Jaisalmer, Rajasthan, on Saturday, made key decisions aimed at supporting the small-scale sector and preventing market monopolisation, the Kerala Finance Minister’s office said here.
The council also introduced measures expected to boost the business sector, a significant step taken during the meeting, according to an official release.
Kerala has been demanding for a long time to ensure accuracy in the Integrated Goods and Services Tax (IGST).
One of the key decisions was to mandate that bills for online services clearly specify the state where the service is provided, it added.
Currently, many inter-state transactions lack proper documentation of the service’s location, resulting in the state of consumption not receiving the applicable tax. This change is expected to address the issue and ensure more accurate tax distribution, the release said.
In the previous GST Council meeting, it was decided that if unregistered individuals rent out buildings to businesses, the tenant would be required to pay GST on the rent under the reverse charge mechanism. However, this created an additional burden for traders under the composition scheme, as they are not eligible to claim input tax credit for such payments.
To address this, the GST Council meeting has decided to exempt traders registered under the composition scheme from the reverse charge tax liability on rent, the release added.
The Council meeting also intervened in key issues such as the tax rate on food in hotels with premium room rents, taxes on medicines for specific cancer treatments, and the imposition of late fees on GST returns.
In response to Kerala’s demand for accurate IGST settlement, the GST Council has formed a committee of officials to examine various aspects of the IGST process. This committee is tasked with providing recommendations to improve the accuracy of settlements.
The release stated that these effort will further continue to ensure accuracy in this area and will strengthen the state treasury.
During discussions on including aviation turbine fuel in the GST framework, Kerala firmly opposed any move that could undermine the limited taxing powers of the states post-GST implementation, the release added.
Additionally, while Kerala was granted permission to collect a flood cess after the 2018 floods, Andhra Pradesh has also sought approval from the Council to levy a cess.
Kerala not only supported this demand but also called for state governments which are better attuned to local issues to be allowed in mobilising the necessary resources, the release added. (PTI)
