Raises tax on used car sales; postpones debates on insurance, ‘sin’ products

The 55th Goods and Services Tax (GST) Council meeting, held in Jaisalmer, Rajasthan, under Finance Minister Nirmala Sitharaman on Saturday, deferred discussions on the much-anticipated proposal to restructure GST on insurance premiums. This issue had drawn considerable attention, as recent reports speculated on potential exemptions or rate reductions, particularly for health insurance premiums.

Currently, insurance premiums for individuals (other than senior citizens) are subject to an 18% tax. According to government sources, a proposal for an exemption on health insurance premiums for policies up to ₹5 lakh was under consideration.

The GST Council also postponed discussions on the widely discussed rate rationalisation for various consumer items, including so-called ‘sin’ products. This matter was referred to a group of ministers (GoM), which has delayed the submission of its report to the GST Council. The report, which recommends changes to 148 items (including raising the tax on sin goods like cigarettes and aerated beverages to 35%), will be presented at the next meeting.

Additionally, the GST Council did not address the issue of GST on e-commerce platforms, which remains a contentious subject in India. Tax laws have struggled to keep pace with the rapidly evolving technology-driven business models in this sector. Under the current GST framework, e-commerce platforms face specific compliance obligations for goods and services facilitated through their platforms.

However, the Council did make decisions on other products and services. These include a 5% GST on ready-to-eat popcorn mixed with salt and spices (provided it is not pre-packaged) and a 12% GST on pre-packaged and labeled popcorn. The Council also proposed an 18% GST on caramel popcorn and a 5% GST on fortified rice kernels, regardless of their end use.

One other key decision was the consensus to impose an 18% GST on the sale of old and used electric vehicles (EVs) and smaller petrol and diesel cars, up from the current 12%.

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