GST Rejig Proposed: Insurance Premiums Exempt, Higher GST on Shoes and Watches
The Group of Ministers (GoM) on GST rate rationalisation proposed significant changes to the Goods and Services Tax (GST) structure on Saturday, aiming to balance relief and revenue generation.
The key changes include exemptions on life and health insurance premiums, a reduction in taxes on certain consumer goods, and a hike on luxury items.
Insurance Premiums Exempted from GST
The GoM, led by Bihar Deputy Chief Minister Samrat Chaudhary, recommended exempting GST on health insurance premiums for policies covering up to ₹5 lakh for individuals, excluding senior citizens. Currently, health insurance premiums attract an 18% GST. For policies with coverage exceeding ₹5 lakh, the 18% GST will remain. Additionally, the GoM suggested removing GST on health insurance premiums for senior citizens, regardless of the coverage amount.
Term life insurance premiums, which also currently attract 18% GST, are likely to benefit from these proposed changes, offering significant relief to policyholders. These proposals are expected to be finalized by the GST Council after further review.
GST Reduced on Bicycles, Water Bottles, Notebooks
To provide relief to consumers, the GoM proposed reducing GST from 18% to 5% on 20-litre packaged drinking water bottles and from 12% to 5% on bicycles priced below ₹10,000. Exercise notebooks would also see a reduction in GST from 12% to 5%, aiming to make basic education-related items more affordable.
Higher GST on Luxury Goods
In contrast, the GoM suggested raising GST on high-end consumer goods such as shoes priced above ₹15,000 and wristwatches costing over ₹25,000 from 18% to 28%. This move targets luxury products, balancing revenue generation with consumer-friendly tax cuts.
The overall GST restructuring is projected to generate a revenue surplus of ₹22,000 crore. The GoM is expected to submit its final report to the GST Council by the end of October 2024 for approval and implementation.
