Real wallet-friendly shake-up: GST 2.0 to feel like ‘Good and Simple Tax'
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Mint
4 minutes ago
- Mint
Ministerial group in favour of removing GST on health, life insurance
New Delhi: In a significant move aimed at bolstering financial security for citizens in healthcare, a ministerial group appointed by the Goods and Services Tax (GST) Council on Wednesday was broadly in favour of exempting health and life insurance premiums from the 18% tax it is subjected to, according to ministers who attended the meeting. 'The group of ministers discussed the proposal to make these insurance services free of GST. States expressed their views," convenor of the group of ministers (GoM) and Bihar's deputy chief minister Samrat Chaudhary told mediapersons after the meeting. 'The group of ministers' report will be placed before the GST Council." Further, Punjab finance minister Harpal Singh Cheema told mediapersons that members of the ministerial group felt the benefit of tax reduction should be passed on to the consumers by businesses. Two government officials told Mint on the condition of anonymity that the tax relief on health and life insurance will be available for individuals and, perhaps, for family health plans as well. However, they did not offer clarity on whether the relief will be available for group policies purchased by companies. As per official data for FY23, total health insurance premiums in India amounted to approximately ₹90,032 crore. Of this, individual health insurance premiums contributed 39% or ₹35,300 crore. GST amounting to ₹6,354 crore was collected on individual health insurance premiums at the current rate of 18%. Experts said the move to exempt GST on health and life insurance premiums would provide significant relief to households. 'At present, the tax burden discourages wider penetration of insurance, particularly among the middle class and lower-income groups. By removing GST, the government would effectively encourage higher insurance adoption, leading to greater financial security and risk coverage in society," said Rajat Mohan, senior partner at AMRG & Associates, a chartered accountancy firm. However, another expert said removing the GST would not lead to a full 18% price cut. 'This is because insurance companies won't be able to claim back the GST they pay on their own expenses, like commissions, office rent, software, etc," said Saurabh Agarwal, tax partner at EY. 'This input tax will now become a cost for them. The final price reduction for consumers will only be the net amount after accounting for this new input tax cost." Agarwal added that if the tax had been 'zero-rated" instead of 'exempt", companies could have claimed a refund for the GST paid on their inputs, and consumers would have seen a full reduction of the tax from their premiums. However, Narendra Bharindwal, president of Insurance Brokers Association of India (IBAI), said while some insurers, especially stand-alone health insurance companies, may find a few difficulties arising from the loss of input tax credit, the overall benefit to the policyholders in terms of a lower upfront cost more than balances the concerns. To be sure, if a service or product is zero-rated, such as the supplies to an SEZ, suppliers will be able to claim refunds for GST paid on raw materials and services consumed in their business operations. However, if it is exempt, for example, in education and health, refund is not possible. It remains unclear which model the authorities are likely to adopt. On the other hand, Gupral Singh Dhingra, joint managing director of Prudent Insurance Brokers said from the point of view of assistance to industry, a calibrated cut to 5% GST may be preferred to a complete waiver. 'It is relief to the consumer balanced with operational efficiency by maintaining the ITC chain for insurers along with cascading costs," Dhingra said. He added that while a nil GST regime would directly lower out-of-pocket costs and make health and life insurance extremely affordable, even 5% GST would be far better than the current 18% and would constitute noteworthy savings while also helping insurance companies and intermediaries to make up their costs. C.R. Vijayan, former secretary general of the general insurance council, said the reduction or exemption of GST on health and life insurance products will benefit customers by way of reduction in premium. "But the real benefit will only flow if GST exemption or cuts on products are also aligned with similar cuts or exemption on GST on insurance servicing and administration charges that are also loaded into premium," he added. Insurers welcome the move Broadly, though, insurance companies, which have sought GST cuts on health insurance for long, have welcomed the development. 'The proposal has potential to boost growth in the sector," said Alok Rungta, managing director and CEO of Generali Central Life Insurance Ltd. 'The benefit has to be passed on to consumers. In a developing nation like us, more affordable health and life care will boost insurance penetration." Jude Gomes, MD & CEO Ageas Federal Life Insurance Co. Ltd. said insurance is an essential safety net for families, and called the looming GST cut a customer-centric move. At the same time, he said that 'it is essential that we tackle some of the structural issues like the inverted duty structure that still affects industry efficiency and margins". Welcoming the development, Sharad Mathur, managing director and CEO of Universal Sompo General Insurance Ltd. said it sends a strong signal about the government's commitment to long-term financial resilience and inclusive growth. 'If implemented, this exemption could encourage higher insurance penetration and support a more robust risk management culture across the country," said Mathur. 'Lower premiums will encourage families and individuals to purchase higher covers, increase penetration in first-time buyers, rural households, and MSMEs, and grow long-term savings and retirement planning," said Bharindwal of IBAI. Other GST changes Meanwhile, the finance ministry said in a social media update that finance minister Nirmala Sitharaman addressed the ministerial groups reviewing proposals on health and life insurance, tax rate rationalisation and the future of GST compensation cess. Chaudhary said a separate GoM on broader GST rate rationalisation, which too he is convenor of, will examine the proposals on tax rate revision on Thursday. The proposals to that ministerial group from the central government include doing away with the 12% GST slab and shifting most of the products and services to the 5% slab. It is also recommended to do away with the 28% slab and shift many of the products to the 18% slab. A new 40% slab will be introduced that will apply to select sin goods such as tobacco and some high-end sports utility vehicles, which currently have an overall tax liability of 48% to 50% including a cess. The effect of these proposals would be a sharp reduction in the tax burden on many commonly used products like packaged food items as well as on automobiles.
Mint
4 minutes ago
- Mint
Ashok Leyland is in top gear on margin outlook, potential GST cuts
Ashok Leyland Ltd's shares have risen 11% over the past four trading sessions and hit a new 52-week high of ₹134.31 on Wednesday—not without reason. First, the management's commentary, especially on the margin scenario, in the recently held June quarter (Q1FY26) earnings call, was encouraging. Second, the anticipated cuts in the goods and services tax (GST) rates could potentially lower the on-road prices across auto segments, thus spurring demand, which is expected to benefit many companies, including Ashok Leyland. For the commercial vehicle (CV) maker, profit margin expansion has been a key focus area. For FY26, the management's 'overall aspiration would be to beat the last year's margins by a handsome margin". Its medium-term goal is to achieve a mid-teen Ebitda margin. For perspective, Ashok Leyland's FY25 standalone Ebitda margin had expanded 72 basis points (bps) year-on-year to 12.7%. Q1FY26 Ebitda margin was up 52 bps to 11.1% even though demand was subdued. The metric dipped 393 bps sequentially as Q4 tends to be seasonally stronger. Kumar Rakesh, analyst at BNP Paribas Securities India said, Ashok Leyland has delivered year-on-year margin expansion for the fourteenth successive quarter in Q1FY26 even as we are yet to enter the next CV upcycle. 'A soft base in H2FY26, better defence business outlook, positive trends in lateral data and multiple product interventions should result in solid FY26 earnings growth," added Kumar in a report on 15 August. Q1FY26 Ebitda margin expansion was mainly led by the 150 bps improvement in gross margin to 29.4%. Despite material cost pressures created by steel safeguard duty and tariff volatility, gross margin improved due to cost-saving efforts, firm price realization and a better mix. However, higher staff costs and other expenses curbed Ebitda margin expansion. Thus, Q1 Ebitda growth came in at a modest 6.4%, which is still higher than the mere 1.5% growth in total operating revenue to ₹8,725 crore, aided by marginal growth in volume and blended price realization. As per the management, the company's MHCV (medium and heavy commercial vehicle) volumes excluding defence rose 2% year-on-year in Q1 versus 2% domestic industry volume drop on a high base. It expects MHCV industry to clock mid-single digit volume growth in FY26 and slightly higher than that for LCV (light commercial vehicle). The management is optimistic on the company's volume and margin uptrend in the second half of FY26 backed by factors like lower interest rates, improved capex and the company's upcoming new product launches. While Q1FY26 defence revenue fell to ₹120 crore from ₹400 crore in Q1FY25, orderbook stands at ₹1,000 crore and revenue should improve going ahead. Within subsidiaries, Switch India achieved profit-before-tax breakeven in Q1 and aims to be profit-after-tax positive in FY26. Switch India has an order book of over 1,500 buses. Ashok Leyland's shares have surged 21% so far in 2025 as investors are hopeful about volume growth. Cyclicality in the MHCV segment has been a concern for investors. But as Motilal Oswal Financial Services points out, 'Over the years, Ashok Leyland has effectively reduced its business cyclicality by focusing on non-MHCV segments." The broking firm expects that a net cash position will enable Ashok Leyland to invest in growth avenues in the coming years. Net cash as on 30 June was ₹800 crore. Still, slower-than-expected MHCV industry growth can weigh on the investor sentiment. The trends in replacement demand are worth tracking.
Economic Times
4 minutes ago
- Economic Times
Data will decide winners in generative AI era: Clearwater
With generative AI changing the way enterprises are run, companies should focus on data, which will be a key differentiator, said Sandeep Sahai, chief executive of Clearwater Analytics, a NYSE-listed investment accounting solution provider. Sahai said people are not thinking enough about where the data is and getting access to the data, as the focus is more on the large language models (LLM). He explained that having the right data to train matters, since businesses require a high degree of accuracy, and makes sure it doesn't hallucinate. "I shouldn't say this, but most LLMs are somewhat similar in their capability. There are differences and all are quite powerful. Then the only question is, what are you training on? And if you can get the data right in a spot which is readable, guess what? Then you win. That is what we are focused on," Sahai said. Clearwater Analytics, which manages $9-10 trillion worth of assets and counts companies such as JP Morgan among its clients, has developed its own proprietary model that has been trained on client data in the last two and a half years. The company recently acquired Enfusion and Beacon, which are in investment management and risk management solutions, respectively, which provide Clearwater Analytics with access to data. "(With the acquisition) We now have the data about trading, accounting, and risk all at one spot. When you think about Google, all the searches everybody does is in one spot. (Similarly), Whoever has the most data wins, those with access to only public data lose eventually," he from data, one of the biggest challenges are rapidly changing business models. Sahai likened this to the taxi industry and Uber, where instead of making the taxi industry efficient, it had given way to said that with AI, the idea is not to make taxi industry more efficient. "The challenge is really in companies being thoughtful about completely changing. If people think of it like an incremental technology, they will be in trouble," he Sahai argued that it is naive to declare software is dead, he agreed that generative AI will significantly alter the current state of the software companies. "It is going to make them transform, become more efficient and provide value. (But) the software companies that do not innovate will have a hard time," he said. Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. How an auto giant trapped global investors in an INR1,000 crore heist Fortis Healthcare still heals portfolios, but valuations are running hot. Swiggy, Tencent backer Prosus gets Rajinikanth fan to script India AI play IndiGo's GIFT City unit: Simple expansion or is there more to it than meets the eye? Stock Radar: Rico Auto stock showing signs of bottoming out after about 40% fall from highs; what should investors do now? GST rationalization: You don't become irrational; 10 stocks, from two sectors, some may get more, some less, some nothing Focus on core business and ignore the rest: 5 small-caps from different sectors with upside potential of up to 48% Multibagger or IBC - Part 20: An ICE-to-EV pivot is transforming this small-cap auto ancillary company
