GST panel bats for exemption on insurance premium, health cover for senior citizens; reduces tax on 20L water bottles, bicycles

The GoM on GST rate rationalisation on October 19 decided to exempt health insurance premiums up to Rs 5 lakh coverage and term life insurance premiums. The GoM also decided to lower tax rates on 20-litre packaged drinking water bottles, bicycles and exercise notebooks to 5 percent, but suggested raising taxes on high-end wrist watches and shoes, according to a PTI report. 

The rate rejig decision taken by the GoM on GST rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary would lead to a revenue gain of Rs 22,000 crore, the report added. 

GST on term life insurance premiums are likely to be exempted for all persons, including plans that consist of family members. The GoM decided to exempt GST on premiums paid for health insurance with coverage of Rs 5 lakh for individuals other than senior citizens. Premiums paid for health insurance coverage of above Rs 5 lakh will continue to attract 18 percent GST. 

However, there might be no GST on insurance premium paid for senior citizens, irrespective of the coverage amount. Currently, 18 percent GST is levied on life insurance premiums paid for term policies and family floater policies. 

“Every GoM member wants to give relief to people. Special focus be on senior citizens. We will submit a report to the Council. A final decision will be taken by the Council,” Bihar Deputy Chief Minister Samrat Chaudhary, who is the convenor of the GoMs on insurance and rate rationalisation, said after the meetings. 

The GoM proposed reducing GST on packaged drinking water of 20 litres and above to 5 percent from 18 percent. If the GoM’s recommendation is accepted by the GST Council, the GST on bicycles costing less than Rs 10,000 will be reduced to 5 percent from 12 percent. GST on exercise notebooks will be reduced to 5 percent from 12 percent, the GoM proposed. 

Meanwhile, the GoM suggested hiking GST on shoes above Rs 15,000 a pair and on wrist watches above Rs 25,000 from 18 percent to 28 percent. 

The GoM on rate rationalisation in its previous meeting had discussed tax rate tweaks on over 100 items, including lowering taxes on certain goods from 12 to 5 percent to give relief to the masses. 

Some items in the 18 percent slab like hair dryers, hair curlers, and beauty or make-up preparations that the GoM took up could be back in the 28 percent bracket. 

The six-member GoM also includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, and Kerala Finance Minister K N Balagopal. 

Last month, the GST Council in its meeting had decided to set up a 13-member GoM to decide on tax on health and life insurance premiums. 

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28 percent. 

Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury and sin goods attract cess on top of the highest 28 percent slab. 

(With inputs from PTI)