|
GST Council Defers Decision on Insurance Tax Cuts Amid Lack of Consensus Among States
The GST Council's 55th meeting in Jaisalmer faced a deadlock over proposed GST rate cuts for term and health insurance. Several states, including West Bengal, Kerala, and Karnataka, expressed concerns over potential revenue losses, leading to the deferral of the decision.
The GST Council's 55th meeting, currently underway in Jaisalmer, Rajasthan, reportedly faced challenges in reaching a consensus on key tax issues, particularly those related to insurance premiums.
Several states have expressed concerns over proposed reductions in the Goods and Services Tax (GST) rates for term and health insurance. The matter has reportedly been deferred for further examination as a result.
Despite considerable interest from the middle class, which stands to benefit from potential tax cuts, states such as West Bengal, Kerala, and Karnataka are not on board with the proposal to reduce the GST rate on term insurance from 18% to 5% and make similar cuts for health insurance premiums.
The issue, which was initially assigned to a Group of Ministers (GoM) led by Bihar’s Deputy Chief Minister Samrat Chaudhary, has failed to gain the necessary support from states, mainly due to concerns over revenue losses. The GoM had suggested slashing the rates as a means to ease financial burdens on consumers, but states remain wary of the financial implications.
The Centre, along with state counterparts, generated Rs 16,400 crore in GST revenue from life and health insurance in the 2023-24 fiscal year, a slight decrease from the previous year. Lowering the tax rates could have resulted in an estimated annual revenue loss of Rs 2,500 crore, further complicating the issue for states, especially after the compensation cess was withdrawn, which previously helped cover any gaps in revenue.
|
