The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, is set to address several critical issues in its meeting scheduled for December 21, 2024, in Jaisalmer. These include the levy on health and life insurance premiums, rate rationalisation proposals for over 150 items, and clarification on the taxability of food delivery services.
Key Discussions on the Agenda
1. Health & Life Insurance Premiums
The Group of Ministers (GoM) tasked with evaluating the GST on insurance premiums has submitted its report. Proposed changes include:
- Complete GST exemption for term-life insurance premiums and health insurance premiums for senior citizens, costing the exchequer approximately ₹3,200 crore annually.
- Reduction of GST rates on health insurance premiums (excluding senior citizens) from 18% to 5%.
If approved, these changes are expected to reduce insurance costs for policyholders.
2. Rate Rationalisation on 150 Items
The GoM has proposed a restructuring of GST rates, which could generate an additional ₹22,000 crore per year for the Centre and states. Key proposals include:
- Reducing GST on readymade garments priced up to ₹1,500 from 12% to 5%, while increasing the rate to 18% for garments priced between ₹1,500 and ₹10,000.
- Lowering GST to 5% on:
- 20-litre packaged drinking water bottles (from 18%)
- Bicycles (from 18%)
- Exercise notebooks (from 12%)
- Raising GST to 28% for:
- Wristwatches priced above ₹25,000
- Shoes priced above ₹15,000
- Introducing a special rate of 35% on sin goods like tobacco, pan masala, and aerated beverages. Some sources suggest these items may attract the maximum rate of 40%.
3. Taxability of Food Delivery Services
The Council is expected to clarify whether 5% GST on food delivery app charges (e.g., Zomato, Swiggy) will be applied retrospectively from 2022.
- Recent notices have been issued to food delivery companies for GST shortfalls. Zomato, for instance, received a ₹803 crore notice for the period of 2019-2022.
- Authorities argue that 18% GST should be levied on delivery charges. However, delivery partners, often unregistered due to their turnover being below the ₹20 lakh threshold, complicate compliance.
Impact of Rate Changes
Proposed changes in GST rates could:
- Offer financial relief to consumers on essential items like health insurance, packaged water, and bicycles.
- Increase tax liabilities on luxury goods such as high-end wristwatches and shoes.
- Boost government revenue from high-tax sin goods.
Upcoming Pre-Budget Consultations
Ahead of the Council meeting, state finance ministers will meet with the Union Finance Minister on Friday to discuss pre-Budget proposals, highlighting the alignment of GST policies with broader fiscal priorities for 2025.
Conclusion
The GST Council’s decisions on rate rationalisation, insurance premiums, and taxation of food delivery services will significantly impact businesses, consumers, and government revenues. With a focus on balancing revenue growth and consumer relief, these discussions are poised to set the tone for future tax reforms.
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