GST Council Meet today: Insurance tax, payment aggregators — what to expect

GST Council Meeting: The session is expected to address several critical topics, including the taxation of insurance premiums, proposed rate rationalisations, and more.

In Short

• GST Council to discuss lower rates on insurance premiums today

• Discussion on 18% GST for small digital transactions likely

• Review of online gaming GST revenues post-28% tax implementation

The 54th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and featuring state finance ministers and tax officials, is set to take place today (September 9).

The session will address several critical topics, including the taxation of insurance premiums, proposed rate rationalisations, and a review of online gaming revenues.

Taxation on health and life Insurance

A major agenda item is the potential reduction of GST rates on health and life insurance premiums. The GST Council will explore whether to lower the current 18% tax rate on health insurance or exempt specific groups, such as senior citizens, from this burden.

This discussion follows calls from opposition leaders and BJP figures, including Union Transport Minister Nitin Gadkari, who advocate for GST exemptions on these premiums.

Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co., stated, “Despite being the world’s most populous country, India ranks among the lowest in terms of life and medical insurance coverage per capita. A reduction or exemption of GST on these premiums could significantly enhance affordability and insurance penetration.”

The Fitment Committee will also present findings on the impact of GST on life, health, and reinsurance premiums. GST on health insurance premiums generated substantial revenue—Rs 8,262.94 crore in FY24—highlighting the fiscal implications of any proposed changes.

Online gaming revenue report

The Council will review a status report on GST revenues from online gaming, comparing figures before and after the October 1, 2023, implementation of a 28% GST on entry-level bets.

This change aimed to address tax evasion by offshore gaming platforms, which are now required to register and pay taxes.

Although significant alterations to the current rate are unlikely, the review will provide insight into the tax regime's effectiveness.

Taxation on payment aggregators

The GST Council may also consider imposing an 18% GST on small digital transactions up to Rs 2,000 made via debit and credit cards through payment aggregators (PAs), according to media reports.

This proposal will be discussed at the meeting, potentially impacting the cost of digital transactions for consumers and businesses alike.

Drive against fake registrations

Another focus will be the effectiveness of the ongoing crackdown on fake GST registrations.

Launched on August 16, this drive aims to identify and eliminate non-existent GSTINs, with a total suspected tax evasion amount of Rs 24,010 crore reported from previous audits.

The Council will assess the progress of this initiative and the steps taken against violators.

Notifications and amendments

The GST Council is expected to approve notifications from the previous meeting, including the amnesty scheme and various amendments to GST law introduced in the Finance Act 2024. These changes include waiving interest and penalties for demand notices and adjusting appeal limits for the GST Appellate Tribunal.

Key expectations

Reduction of GST rates on life and health insurance: Industry experts, including Shivashish Karnani, advocate for a reduction or exemption of GST on life and medical insurance premiums. Karnani highlighted, “A lower GST rate or exemption could address the disparity in insurance penetration compared to developed countries.”

Clarification on cross-border transactions: The meeting may also address ambiguities related to GST on cross-border transactions between Indian companies and their foreign branches, a matter that has led to significant disputes and notices from the tax department.

Compensation cess: Discussions are anticipated on whether to continue or discontinue the GST Compensation Cess, originally intended to address states' revenue shortfalls post-GST implementation but extended several times.

GST appellate tribunal mechanism: There is a push to expedite the operationalisation of GST Appellate Tribunals to improve dispute resolution efficiency.

Rate rationalisation: The Council may review proposals to streamline the GST slab system, potentially reducing the current four-tier structure to three slabs.

Taxation scheme for tobacco products: The GST Council might discuss a capacity-based taxation scheme for commodities like pan masala and gutkha to tackle tax evasion.

Online gaming taxation: While the 28% GST on online gaming remains in place, further industry input and legal discussions are expected before any potential changes.

Expert insights

Sandeep Pareek, Partner, Indirect Tax, BDO India, shared his perspective on the potential GST changes: “Multiple stakeholders, including sitting ministers, have requested the exemption of GST on term and health insurance. The GST Council may consider this demand favorably, especially if the revenue impact is manageable. For a complete effect of such exemptions, insurance companies should also be allowed full input tax credit without reversals.”

Siddharth Surana, Director at RSM India, highlighted: “The operationalisation of GST Appellate Tribunals needs to be expedited to improve dispute resolution. Discussions on rate rationalisation and the future of the GST Compensation Cess are crucial. Simplifying the GST structure and addressing ambiguities in cross-border transactions will be key focus areas.”

As the meeting unfolds, stakeholders will closely monitor these discussions for updates on tax policies and regulatory changes that could impact various sectors.

Source:- India Today