States have advocated for exempting premiums paid on health insurance for senior citizens and term life insurance, sources said on Saturday. This view emerged during a Group of Ministers (GoM) meeting chaired by Bihar’s Deputy Chief Minister Samrat Chaudhary, held here.
“Every GoM member wants to give relief to people. Special focus be on senior citizens. We will submit a report to the council. A final decision will be taken by the council,” Chaudhary said without giving much of the details. Meanwhile, a member of the GoM said that a view emerged about exempting premiums paid on health insurance for senior citizens and policy for all with ₹5 lakh coverage. Similarly, in the case of term life insurance, with family members’ premiums being fully exempted, the members said that for all other policies, GST rates should remain 18 per cent.
The GoM is to submit a report by October 30, and then the GST Council will take up the matter in its meeting, which is likely to occur next month. As things stand, the GST rate on premia for health insurance, term and unit-linked insurance plans attracts 18 per cent GST. On endowment plans, the GST is applied differently. While it is 4.5 per cent for premium paid during the first year, it is 2.25 per cent from the second year. For life insurance in the form of single premium annuity policies, the GST rate is 1.8 per cent. Rates are the same for all age groups.
Rate rationalisation
Meanwhile, another GoM, under the convenorship of Chaudhary, agreed to recommend lowering tax rates on 20-litre packaged drinking water bottles, bicycles and exercise notebooks to 5 per cent but suggested raising taxes on high-end wristwatches and shoes. The entire exercise would lead to a revenue gain of ₹22,000 crore. “This would help cover revenue loss from insurance,” an official said.
According to him, the GoM proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent. If the GoM’s recommendation is accepted by the GST Council, GST on bicycles costing less than ₹10,000 will be reduced to 5 per cent from 12 per cent. Also, GST on exercise notebooks will be reduced to 5 per cent from 12 per cent.
The GoM also suggested hiking GST on shoes above ₹15,000 a pair and on wrist watches above ₹25,000 from 18 per cent to 28 per cent. Earlier, it had discussed tax rate tweaks on over 100 items, including lowering taxes on certain goods from 12 to 5 per cent, to relieve the common man. Some items in the 18 per cent slab, like hair dryers, hair curlers, and beauty or make-up preparations that the GoM took up, could be back in the 28 per cent bracket.
GoM’s recommendation would be taken up by the GST Council. As on date, there are four key rates – 5, 12, 18 and 28 per cent besides special rates such as 0.25 per cent (rough diamond), 1 per cent (affordable housing) and 3 per cent (gold).