GST Council’s Review of Tax on Health and Life Insurance Covers
- September 10, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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GST Council’s Review of Tax on Health and Life Insurance Covers
Sub: Eco
Sec: Fiscal Policy
- Formation of a Group of Ministers (GoM):
- A new GoM has been formed to review the 18% GST on health and life insurance premiums.
- The GoM has a 50-day deadline to submit its recommendations by the end of October 2024.
- The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, will take a decision based on the review in its meeting in November.
- Key Considerations for Review:
- The GoM will assess whether the GST rate should be reduced or scrapped altogether for insurance premiums.
- It will also determine who should be exempted from the tax, if applicable.
- The treatment of group insurance policies will also be examined.
- Extension of GST Compensation Cess:
- A new ministerial group will deliberate the future of the GST Compensation Cess, originally levied till July 2022.
- The cess was extended until March 2026 to repay borrowings raised during the COVID-19 pandemic to compensate states.
- The borrowings are expected to be repaid by 2025 or January 2026. The GoM will assess if the cess should continue in a different form after repayment.
- GST Rate Changes:
- The GST rate on three cancer drugs – Trastuzumab Deruxtecan, Osimertinib, and Durvalumab – has been reduced from 12% to 5%.
- The GST rate on car seat covers has been increased from 18% to 28% to align with the rate on motorcycle seats.
- The GST on certain extruded savory snacks has been reduced from 18% to 12%.
- Real Estate Valuation:
- The Council asked a GoM to examine the valuation of land costs in real estate projects, as the cost of land in a project can vary.
- Currently, one-third of the value of construction services is carved out of the taxable value to account for land costs. The GoM will review this approach.
- Exemption for Research Funds:
- The GST Council exempted State-affiliated universities and those established under State or Central laws from paying GST on research funds.
- The exemption applies to research funds from both the public and private sectors.
- This decision addresses 39,000 crore in tax notices served to universities due to interpretation issues over quid pro quo involved in the funds.
- The exemption is not retrospective, but existing cases will be resolved on an “as is where is” basis.
- Other Important Developments:
- The GoM on real estate has been tasked with reviewing the impact of land costs on construction services taxation.
GST Council
- The GST Council is the apex decision-making body responsible for all matters related to Goods and Services Tax (GST).
- Chaired by the Union Finance Minister, it includes State Finance Ministers from all Indian states and Union Territories.
Functions:
- The council reviews GST rates on goods and services, proposes tax law changes, and ensures uniformity in tax policies across India.
- It plays a central role in determining tax slabs, exemptions, and procedural changes to improve tax administration.
GST Compensation Cess:
The GST Compensation Cess is a levy on certain goods, like automobiles and demerit goods (tobacco, soft drinks), to compensate states for any revenue loss after the implementation of GST.
Duration and Extension:
Originally intended to be levied till July 2022 for the first five years of GST, the cess was extended until March 2026 due to the revenue shortfall caused by the COVID-19 pandemic. The extended period is meant to repay borrowings taken to compensate states.