GST Council Meeting: Insurance to food delivery charges -- what will be costlier, what will be cheaper?

The 55th meeting of the GST Council to take place on December 21, 2024, Saturday, will address a range of issues including adjustments to rates for various sectors such as insurance, luxury goods, aviation turbine fuel (ATF), and more. In the past few months, it has been discussed that the Council is expected to consider proposals aimed at lowering GST rates on premiums for life and health insurance policies.

Besides, there is a strong possibility of a revised focus on reducing the tax burden for individuals by decreasing rates on essential items like food delivery services, bicycles, and packaged drinking water. 

How much tax do I have to pay? Calculate now

One crucial point for discussion is the potential incorporation of aviation turbine fuel (ATF) into the GST regime. Should this proposal be sanctioned, it would bring uniformity in taxation practices among states and permit airlines to avail input tax credit (ITC) on ATF, fulfilling a longstanding demand of the aviation industry.

Additionally, the Council will also deliberate on the possibility of increasing rates for high-end products such as wristwatches, shoes, and expensive readymade garments, aligning with the pricing-based tax differential rates introduced in the indirect tax regime over seven years ago.

Furthermore, the Council will assess changes in rates for 148 items, such as pre-owned electric vehicles (EVs) and compact petrol and diesel vehicles. These items could potentially experience a GST rate hike from 12% to 18%. 

Insurance premium

During the upcoming GST Council meeting, there is a proposal to streamline GST on insurance premiums. This proposal has gained support from both the Financial Services Department and the Insurance Regulatory and Development Authority of India (IRDAI). The plan is to revamp the GST structure for insurance premiums, with a specific focus on benefits for senior citizens, health insurance with coverage of Rs 5 lakh, and term life insurance. The Group of Ministers has recommended exempting these categories from GST, while suggesting that the current rates be maintained for all other types of insurance policies.

Currently, health insurance, term life insurance, and unit-linked insurance plans are subject to an 18 per cent GST rate. Endowment plans have a different GST application, with a rate of 4.5 per cent in the first year and 2.25 per cent from the second year onwards. Single premium annuity policies for life insurance carry a 1.8 per cent GST rate. These rates apply uniformly across all age groups.

During its presentation to a Parliamentary panel, the IRDAI highlighted that various developed nations, such as the European Union and Canada, do not impose VAT or GST on insurance products. This underscores the case for implementing similar exemptions in India to promote wider acceptance of insurance, according to the regulator.

Citing the growing longevity and healthcare requirements, the IRDAI emphasized the importance of increasing the adoption of health insurance. It suggested that extending GST relief to micro-insurance and health policies for senior citizens would particularly benefit marginalized groups. The regulator also pointed out the disparity where medical services are tax-exempt while insurance premiums incur GST, creating an unjust burden.