GoM discusses Centre's proposal to remove GST levy on health, life insurance; most members want tax to be zero
Ministers from various states converged in the capital Wednesday to discuss the Centre's proposal to overhaul the GST structure. Finance Minister Nirmala Sitharaman addressed the Group of Ministers (GoMs) constituted by the GST Council on compensation cess, health & life insurance, and rate rationalisation on the proposed next-generation reforms.
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.
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.
'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.
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