GST Council meet: Experts call for timely GST decisions on insurance, ATF and used cars

As the 55th GST Council meeting concluded in Jaisalmer, Rajasthan, experts weighed in on the key issues discussed, particularly the deferral of decisions on insurance tax rates and the proposed GST hike on used cars.

Nilesh Sathe, a former member of IRDAI, expressed disappointment at the delay in reducing GST rates on insurance. “It’s disheartening that consensus was not reached, especially considering how crucial insurance is for consumers.

While the deferral is understandable in terms of revenue loss for states, it’s vital that the decision is made soon. Consumers are waiting for the introduction of reduced rates on health and term life insurance, which would benefit them immensely,” Sathe said.

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He added that the delay is impacting the life insurance and health insurance sectors, and it may only be effective in the next financial year.

MS Mani, Partner at Deloitte India, also stressed the need for clarity on insurance. “We have seen consistent adjustments in GST rates for goods, but services, particularly essential ones like health insurance, still face challenges. It’s time to formally categorize such services as essential within the GST framework,” she stated.

According to Mani, the GST Council should treat health and term life insurance as essential services, similar to how basic goods like food and restaurant services are taxed at lower rates. However, businesses will need to wait a little longer for a final decision on insurance.

Pratik Jain, Partner at PwC India, echoed concerns regarding the inclusion of aviation turbine fuel (ATF) and natural gas under GST.

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“There has been a long-standing discussion about bringing ATF into the GST framework to reduce costs for airlines, as it would allow them to claim input tax credit. This would alleviate some of the rising operational costs that have led to increased airfares,” Jain said.

He believes that over the next year, the debate on bringing ATF and natural gas under GST will gain traction.

Rajat Bose, Partner & Head of Indirect Tax Practice at Shardul Amarchand Mangaldas & Co, added that while the GST rate reduction on insurance could benefit consumers, it must be carefully assessed.

“A thorough review of the impact on the cost structure is necessary before implementing any rate cuts. A hasty decision could lead to increased service costs, which must be avoided,” Bose cautioned.

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