New Delhi, Aug 20 In a move aimed at making insurance more affordable, the Group of Ministers (GoM) on insurance proposed a complete exemption of GST on health and life insurance premiums, Bihar Deputy Chief Minister Samrat Choudhary said on Wednesday.
The proposal, if accepted, could improve insurance penetration in India’s largely underinsured market.
Bihar Deputy Chief Minister Samrat Choudhary, who is a member of the GoM, confirmed that the recommendation will now be placed before the GST Council for a final decision.
He said the council will take a call after consultations with all states.
The GoM’s meeting on August 20 was addressed by Finance Minister Nirmala Sitharaman, who urged states to debate the proposals collectively and arrive at a balanced decision.
While some states supported the exemption plan, others raised concerns about possible revenue losses.
Rajasthan GST Council member Gajendra Singh said GST reforms have not caused major revenue losses to states so far, but certain measures like lower duty on solar equipment and a tax cut on insurance could have financial implications.
Currently, GST is levied at four main slabs -- 5, 12, 18 and 28 per cent. Food and essential goods are taxed at the lower end, while luxury and sin goods fall in the highest slab with an additional cess.
The Centre’s new reform plan aims to simplify the system by focusing mainly on 5 and 18 per cent rates, along with a special 40 per cent levy on a handful of items like sin goods.
The group of ministers on rate rationalisation and insurance is holding two days of deliberations to fine-tune these changes.
The GoM on insurance is specifically examining ways to reduce or remove taxes on premiums, while the GoM on compensation cess is looking at the future of cess collections after the end of the loan repayment period.
The GST Council, which includes representatives from the Centre and all states, is expected to take up the proposals next month.
Prime Minister Narendra Modi has announced that the rollout of the new GST reforms is targeted before Diwali.
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