GoM discusses Centre’s proposal to remove GST levy on health, life insurance; most members want tax to be zero | Business News

All members discussed the proposal to make the GST rate nil on health and life insurance, Choudhary said. “All members agreed with the proposal, but some states gave a differing view. We want GST on insurance to be zero. The proposal will now go to the GST Council,” he said.

“Serious deliberations have taken place on life insurance and health insurance (for individuals) also. We all welcomed it and in fact from the state of Telangana we wanted that insurance GST to be brought down to zero,” said Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka.

However, Telangana state has emphasised that “the premium which from whatever GST you are reducing, has to go down for policyholders, not to the companies. Some mechanism you have to evolve to see to it that whatever we are trying to do should go to the people,” Vikramarka added.

The Finance Minister’s presentation to all members of three GoMs, who are state ministers, was on the lines of the announcement made by the Prime Minister Narendra Modi on Independence Day. Apart from streamlining the multiple slabs under GST into a two-pillar structure of 5 per cent and 18 per cent, the proposal intends to levy a special rate of 40 per cent on sin and demerit goods.

State ministers are learnt to have been informed about the proposal’s details and revenue implications and asked to debate the proposal threadbare before reaching a conclusion.

State ministers who participated in the meeting said the move towards GST rate rationalisation will result in savings for the public and the companies and those could then get invested elsewhere. The rate rationalisation process will be discussed in detail Thursday, while Wednesday’s meeting focused on rate proposals related to life and health insurance, they said.

All GST rate rationalisation proposals will be submitted to the GST Council, said Telangana deputy CM and FM Vikramarka. The overall impact of the proposed changes could result in a revenue loss of around Rs 9,700 crore for Telangana, he added. On profiteering, he said the Council will deliberate once the proposals are tabled before it. Profiteering entails the non-reduction in price of goods and services despite a cut in corresponding tax rates.

“The debate is going on. Overall there will be GST reduction. It will result in savings for the public and companies. The moment you save money, you are going to invest it somewhere, it’s going to have a multiplier effect,” Gajendra Singh, Minister of Medical Health and Services, Rajasthan said.

Singh said states’ losses are not going to be much. “There will be a few minor issues. These are all teething problems,” he said.

For his state Rajasthan, Singh gave the example of the proposed duty cut for the solar energy sector, saying there might be some loss but it’ll boost the industry internationally.

“States are discussing it. Today’s topic is life insurance and medical health insurance. Rate rationalisation discussions will happen tomorrow. Deliberations are on. FM got the ball rolling and it will unfold. Tomorrow is the main day,” Singh said.

The proposal to remove the GST levy on insurance will help make it more affordable, improving financial security for millions and accelerating insurance penetration in India. There is a worry, however, among insurance companies that they will lose the input tax credit (ITC) claim if the GST is completely abolished, which will push up operating costs for insurers.