GST Council forms 3 GoMs to meet Aug 20-21 on rate rationalisation, insurance, cess: Report – Business News

This week will be pivotal for India’s indirect tax landscape with three key Groups of Ministers (GoMs) established by the GST Council set to convene between August 20 and 21 to deliberate major reforms. According to a CNBC TV18 report that cited sources, the three panels will address GST rate rationalisation, taxes on life & health insurance and the compensation cess. They will then forward their recommendations to the GST Council, with the aim of finalising these changes before Diwali.

GoM on Rate Rationalisation

Per the official sources, the GoM on Life and Health Insurance and the GoM on rate rationalisation are both headed by Bihar Deputy Chief Minister. These panels will meet for two days to examine the existing tax structure and recommend changes aimed at streamlining rates and ensuring parity in the sector. 

The revised tax structure as proposed by the Centre will collapse the existing four-tier GST system into just two principal slabs: 5 per cent and 18 per cent. According to the new proposal, the 12 per cent and 28 per cent brackets are proposed to be eliminated, with most products in the 12 per cent category moving to either 5 per cent or 18 per cent . Further, a few select items would remain taxed at a special 40 per cent  rate, aiming to act as a revenue cushion for the exchequer.

GoM on Life and Health Insurance

The other GoM on life and health insurance, again headed by Bihar Deputy CM will recommend sweeping relief measures. The panel is exploring full GST exemption on health and life insurance premiums for policies up to Rs 5 lakh, specifically benefiting senior citizens. Currently, the insurance premiums levy GST of 18 per cent. 

While the government has estimated an annual revenue impact of about Rs 2,600 crore if the exemptions are implemented, officials argue that this would be compensated by greater insurance coverage. 

GoM on Compensation Cess

The third GoM headed by MoS Finance Pankaj Chaudhary, as stated by the CNBC TV18 report, will meet to discuss the future of the GST compensation cess. The cess was initially introduced to help states bridge revenue shortfalls but it was extended till March 26 to allow the Centre to repay COVID-era loans taken to supplement state finances. Many reports had indicated that the compensation cess might end ahead of schedule. 

Earlier on Friday, PM Narendra Modi had highlighted the importance of reforms under GST, which would bring relief to the common man, farmers, middle class and MSMEs.

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