States have advocated for exempting premium paid on health insurance for senior citizens and term life insurance, sources said on Saturday. The view emerged during a meeting of a Group of Ministers (GoM) under the convenorship of Bihar’s Deputy Chief Minister Samrat Chaudhary held here.
“Every GoM member wants to give relief to people. Special focus be on senior citizens. We will submit a report to the council. A final decision will be taken by the council,” Chaudhary said without giving much of the details. Meanwhile, a member of the GoM said that view emerged about exempting premium paid on health insurance for senior citizens and for policy for all with ₹5 lakh coverage. Similarly, in case of term life insurance, with family members premium should be exempted fully, the members said while adding that for all other policies, GST rates should remain at 18 per cent.
The GoM is to submit report by October 30 and then the matter will be taken up by the GST Council in its meeting likely to take place next month. As things stand, the GST rate on premia for health insurance, term insurance plans and unit-linked insurance plans, attract 18 per cent GST. On endowment plans, the GST is applied differently. While it is 4.5 per cent for premium paid during the first year, it is 2.25 per cent from the second year. For life insurance in the form of single premium annuity policies, the GST rate is 1.8 per cent. Rates are the same for all age groups.
Rate Rationalisation
Meanwhile, another GoM under the convenorship of Chaudhary agreed to recommend lower tax rates on 20-litre packaged drinking water bottles, bicycles and exercise notebooks to 5 per cent, but suggested raising taxes on high-end wrist watches and shoes. The entire exercise would lead to a revenue gain of ₹22,000 crore. “This would help cover revenue loss from insurance,” an official said.
According to him, the GoM proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent. If the GoM’s recommendation is accepted by the GST Council, the GST on bicycles costing less than ₹10,000 will be reduced to 5 per cent from 12 per cent. Also, GST on exercise notebooks will be reduced to 5 per cent from 12 per cent, the GoM proposed.
The GoM also suggested hiking GST on shoes above ₹15,000 a pair and on wrist watches above ₹25,000 from 18 per cent to 28 per cent. Earlier, it had discussed tax rate tweaks on over 100 items, including lowering taxes on certain goods from 12 to 5 per cent, to give relief to the common man. Some items in the 18 per cent slab like hair dryers, hair curlers, and beauty or make-up preparations that the GoM took up could be back in the 28 per cent bracket.
GoM’s recommendation would be taken up by the GST Council. As on date, there are four key rates – 5, 12, 18 and 28 per cent besides special rates such as 0.25 per cent (rough diamond), 1 per cent (affordable housing) and 3 per cent (gold).
