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GST Council may approve GST relief for insurance premiums with ₹2,600 cr impact
Sandip Raj Gupta
20/Dec/2024
What's Covered Under the Article
- Proposed GST exemption for term life and health insurance premiums to cost ₹2,600 crore annually.
- GoM on Cess may get a six-month extension; real estate taxation discussions delayed.
- IGST settlement report finalized to address equitable state distribution issues.
The GST Council is gearing up for its meeting on December 21, 2024, where key topics such as GST exemptions on insurance premiums, IGST settlement processes, and the extension of the Group of Ministers (GoM) on Cess will be discussed.
GST Relief for Term Life and Health Insurance
The Council is likely to deliberate on providing GST exemptions for:
- Term life insurance premiums covering family members
- Health insurance premiums for senior citizens, irrespective of coverage amount
- Health insurance policies offering coverage of up to ₹5 lakh
If implemented, this GST relief will result in an estimated annual revenue loss of ₹2,600 crore, broken down as follows:
- Term life insurance premiums: ₹200 crore annual loss.
- The impact is relatively lower due to input tax credit (ITC) offsets.
- Health insurance premiums: ₹2,400 crore annual loss.
A source close to the matter noted, “If insurers pass on GST relief benefits to consumers by offering cheaper policies, the insurance market could grow by more than 18%, owing to demand elasticity.”
This move is expected to make insurance more affordable, especially for senior citizens and families, potentially increasing penetration in India’s underinsured market.
GoM on Real Estate Taxation
The GoM on real estate taxation will not present its report at this meeting, as it has neither finalized nor submitted an interim report. This delay indicates that discussions on key taxation reforms in the real estate sector will be deferred.
Extension for GoM on Cess
The GoM on Cess, chaired by Minister of State for Finance Pankaj Chaudhary, is expected to receive a six-month extension to finalize its recommendations. The GoM is tasked with exploring new taxation mechanisms for luxury and demerit goods post the scheduled abolition of GST compensation cess in March 2026.
According to sources, the extension is necessary due to ongoing deliberations and legal complexities. The GoM was initially required to submit its report by December 31, 2024.
IGST Settlement Report
The finalized report on IGST settlement is set to be a key agenda item at the December 21 meeting. This report addresses systemic issues in IGST disbursements, including a negative balance in IGST and steps to recover excess IGST disbursed to states.
Key recommendations include:
- Improvements in the IGST settlement process to ensure equitable distribution among states.
- Highlighting weaknesses in the existing system that require immediate rectification.
The IGST committee, chaired by the Additional Secretary of Revenue, comprises officers from state and central governments. This collaboration aims to streamline processes and ensure states receive their rightful dues.
Key Takeaways
- Insurance Relief: GST exemptions for term life and health insurance premiums could boost affordability, particularly for senior citizens, while impacting government revenues by ₹2,600 crore annually.
- Policy Deferrals: The GoM on real estate taxation will not present its findings, while the GoM on Cess is expected to receive a deadline extension to March 2025.
- IGST Focus: A finalized report on IGST settlement highlights systemic weaknesses and proposes measures for equitable state distribution.
The upcoming GST Council meeting will play a pivotal role in shaping India’s tax policy landscape, particularly in addressing key challenges in revenue management and consumer welfare.
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