GST Council Meeting Explores Tax Relief for Insurance, Aviation, and Consumer Goods

The 55th Goods and Services Tax (GST) Council meeting convened on Saturday, with a primary focus on potential reductions in tax rates for health and life insurance premiums, alongside discussions on 148 other items. Chaired by Union Finance Minister Nirmala Sitharaman, this meeting is poised to bring significant changes that could alleviate financial pressures on consumers, particularly in the realm of insurance. One of the most discussed proposals is the exemption of GST on insurance premiums for term life policies, as recommended by a Group of Ministers (GoM) led by Bihar’s Deputy Chief Minister, Samrat Chaudhary. This move aims to make life insurance more accessible to the public. In addition, there is a proposal to exempt premium payments made by senior citizens for health insurance, as well as for individuals paying up to ₹5 lakh for health cover, although a GST rate of 18 percent will remain for premiums exceeding this threshold. Such decisions reflect a broader consensus among states, who are advocating for reduced tax burdens to provide relief to the average citizen. The Council is also expected to address the inclusion of Aviation Turbine Fuel (ATF) under the GST framework, a change that could have implications for the aviation sector and airline ticket prices. Coupled with this, the agenda includes reviewing significant tax rate adjustments proposed by the Fitment Committee, which could see food delivery services like Swiggy and Zomato benefit from a tax decrease from 18 percent to 5 percent, albeit without input tax credit. At the same time, there are suggestions for increasing taxes on certain categories, including a proposed hike on the sale of used electric vehicles and smaller petrol and diesel vehicles from 12 percent to 18 percent. This shift aims to align the taxation of these vehicles with that of larger counterparts, reflecting an effort to standardize tax obligations across vehicle categories. Furthermore, the GoM on GST compensation cess is seeking a six-month extension to prepare its report, as the current cess regime is set to end in March 2026. This panel has been tasked with determining the future trajectory of the compensation cess, which has played a crucial role in stabilizing states' revenues following the implementation of GST. Among other recommendations, the Council is considering a significant increase in taxes on 'sin goods'—such as aerated drinks, tobacco products, and similar items—proposing to raise the GST rate from 28 percent to 35 percent. The existing four-tier tax structure (5, 12, 18, and 28 percent) will remain intact, with the new rate specifically targeting these products. In the realm of apparel taxation, the GoM has put forth suggestions to reassess GST rates based on the price of garments. For example, items priced below ₹1,500 could face a reduced GST of 5 percent, while garments within the ₹1,500 to ₹10,000 range would attract an 18 percent tax. Apparel costing more than ₹10,000 would incur a 28 percent tax rate, a shift aimed at making fashion more affordable while moderating the tax burden on higher-priced items. In a broader context, other adjustments under consideration include reducing GST on large packaged drinking water containers and bicycles, while hiking rates on premium footwear and wristwatches. The ongoing discussions at the GST Council reflect an evolving approach to taxation in India, balancing revenue needs with the imperative to keep essential services and goods affordable for citizens. As the deliberations unfold, stakeholders from various sectors await clarity on the outcomes, which could significantly impact both consumers and businesses across the nation.