GST Relief on Essentials, Hike on Luxury: Big Changes Proposed by GoM

The Group of Ministers (GoM) on GST rate rationalization, headed by Bihar Deputy Chief Minister Samrat Chaudhary, has proposed several key changes, including exempting health insurance premiums up to ₹5 lakh coverage and term life insurance premiums from GST. In its meeting on Saturday, the GoM also suggested reducing tax rates on various essential items and increasing rates on luxury goods.

One of the major decisions is to exempt GST on health insurance premiums for coverage of up to ₹5 lakh, except for senior citizens. Premiums for health insurance coverage exceeding ₹5 lakh will continue to attract an 18% GST. However, for senior citizens, there may be no GST on premiums, regardless of the coverage amount. The final decision on these changes will be made by the GST Council.

Currently, an 18% GST is levied on life insurance premiums, including term policies and family floater policies. The GoM's recommendation aims to provide relief, particularly focusing on senior citizens.

In addition to insurance, the GoM proposed changes in GST rates for various goods. It suggested reducing the GST on 20-litre packaged drinking water bottles, bicycles priced under ₹10,000, and exercise notebooks from the current rates to 5%. At the same time, it recommended increasing the GST on luxury items such as shoes priced above ₹15,000 and wristwatches costing over ₹25,000 from 18% to 28%.

The overall tax rate revisions are expected to generate a revenue surplus of ₹22,000 crore. The final report of the GoM will be submitted to the GST Council by the end of October 2024.

The GoM consists of 13 ministers from states including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. Their proposals aim to rationalize GST rates across various categories to balance revenue generation with public relief. Currently, GST rates are structured into five slabs: 0%, 5%, 12%, 18%, and 28%.