At its November meeting, the GST Council will probably decide on the goods and services tax on insurance products. In the upcoming months, talks on compensating cess and rate rationalisation are expected to continue.
The GST Council resolved to form a Group of Ministers to investigate the GST problem about health and life insurance at its 54th meeting on Monday. Following the Council meeting, Finance Minister Nirmala Sitharaman informed reporters that the Group of Men (GoM) on rate rationalisation, which would have representatives from various states and be led by Bihar Deputy Chief Minister Samrat Choudhary, would give its report by the end of October.
The GST Council will discuss the report during its November meeting, addressing concerns over pure life insurance, mental health insurance, older persons insurance, and group insurance. Currently, insurance is subject to an 18% GST, however, there is increasing pressure to remove or reduce this tax. The GoM members include Bihar, Uttar Pradesh, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat, according to an official statement.
While a decision on a reduced rate or exemption for health insurance is anticipated by November, MS Mani, Partner, Deloitte India, stated that all health/medical insurance types, such as family floaters, group policies, and optional add-on coverages, are anticipated to be taken into consideration so that insurance companies are clear about the modifications they must implement.
The GoM’s suggestion on the GST rate for health and life insurance, which is due by the end of October, will be closely monitored, according to Abhishek Jain, Head of Indirect Tax at KPMG and Partner. A status report on rate rationalisation from the GoM was also given to the Council, and the finance minister said that more talks will be held on the matter. “They will discuss the rates and the slabs at meetings going forward,” she stated. On September 23, the GoM is anticipated to convene once more to discuss the matter in further detail.
The GST Council has established a new Group of Ministers to investigate the future of the compensatory cess, with the focus shifting to how to proceed. The FM stated that income from online gambling rose by 412% to Rs 6909 crore in the six months following the tax’s imposition, from Rs 1,349 crore in the six months preceding the announcement. In a similar vein, over the same year, casino income rose by 30% to Rs 214 crore from Rs 164 crore.
A number of industry-related concerns were also addressed by the Council, including a major reprieve for the aviation sector. It has now chosen to exclude when made without consideration, the import of services by a foreign airline business established in India from a connected person or any of its establishments outside of India. According to the announcement, the council also suggested regularising the previous era “as is, where is.”
According to Rajat Bose, Partner at Shardul Amarchand Mangaldas, “This will put to rest the recent show cause notices where a GST demand of approximately Rs 39,000 crore was raised by the DGGI on foreign airlines operating through branch offices in India.”
According to Saurabh Agarwal, a Tax Partner at EY, the aviation industry is much relieved that airlines are not required to pay GST on services imported by affiliated parties. “Yet similar issues still face the shipping industry, and they require attention,” he stated.
Additionally, it has proposed that a government entity, research organisation, university, college, or other institution registered under section 35 of the Income Tax Act employing funding from the government or private sector be excluded from paying GST on the delivery of research and development services. This comes after seven such organisations received tax notifications.
