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Nirmala Sitharaman To Hold Pre-Budget And GST Council Meetings With State FMs On Dec 21-22

During these two days, the 55th GST Council meeting will be held, with a key agenda item being the decision on whether to exempt or lower GST rates on health and life insurance premiums

Union Finance Minister Nirmala Sitharaman is set to meet with state counterparts on December 21-22 for pre-budget consultations and a session of the GST Council, an official confirmed. The meeting is significant as state finance ministers will present their recommendations for the 2025-26 Budget, scheduled to be unveiled on February 1, 2025, according to a report from PTI.

During these two days, the 55th GST Council meeting will be held, with a key agenda item being the decision on whether to exempt or lower GST rates on health and life insurance premiums. The Council may also discuss a proposed rationalisation of GST rates, potentially reducing the tax on a range of common items from 12 per cent to 5 per cent, following recommendations from a panel of state ministers.

The two-day meeting will take place in Rajasthan, either in Jaisalmer or Jodhpur, the official added.

GST on Health and Life Insurance

Last month, the Group of Ministers (GoM) on health and life insurance GST broadly agreed to exempt insurance premiums for term life policies and health insurance for senior citizens from GST. Additionally, premiums paid by individuals (excluding senior citizens) for health insurance with coverage up to Rs 5 lakh are also likely to be exempt from GST. However, premiums for policies covering amounts over Rs 5 lakh will continue to attract an 18 per cent GST.

The 54th GST Council meeting, held on September 9, tasked the GoM with finalising the report on GST levies on insurance by October-end.

GST Rate Rationalisation

Separately, the GoM on GST rate rationalisation has recommended changes to the tax structure on several goods. The proposed adjustments include reducing the GST on packaged drinking water (20 litres and above) from 18 per cent to 5 per cent and on bicycles priced below Rs 10,000 from 12 per cent to 5 per cent. Additionally, GST on exercise notebooks would be reduced from 12 per cent to 5 per cent.

However, the GoM has also proposed higher GST rates on certain luxury items. GST on shoes priced above Rs 15,000 per pair would increase from 18 per cent to 28 per cent, and the GST on wristwatches costing more than Rs 25,000 would also rise from 18 per cent to 28 per cent.

These recommendations are expected to result in a revenue gain of about Rs 22,000 crore if approved by the GST Council.

GST Structure And Revenue Neutral Rate

Currently, GST follows a four-tier tax structure with slabs at 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Essential items are taxed at the lowest slab or exempted, while luxury and demerit goods are taxed at the highest slab, with an additional cess on top of the 28 per cent rate.

The average GST rate has fallen below the revenue-neutral rate of 15.3 per cent, prompting discussions on further rationalising the tax structure to enhance revenue generation. Bihar Deputy Chief Minister Samrat Chaudhary heads both the 13-member GoM on health and life insurance and the 6-member GoM on rate rationalisation.

Also Read: Goldman Sachs, Bhartia Family Eye 40% Stake In Hindustan Coca-Cola Beverages

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