A host of issues are on the agenda including tax relief for term and health insurance and gift vouchers.
The apex decision making body for GST, chaired by union finance minister Nirmala Sitharaman, is also deliberating increase in tax rate on used cars including electric ones to 18% from 12% now and a clarification on the levy of tax on food delivery apps and flavoured popcorn.
Clarity for Gift Vouchers
A government official familiar with the deliberations said the law panel under the council had recommended that gift vouchers be covered under the definition of prepaid instruments recognised by the Reserve Bank of India (RBI) that are used as a consideration to settle an obligation. They would thus fall in a category that can’t be taxed under GST. The council is expected to accept this recommendation. “The clarification that transaction in vouchers is not liable to GST will put to rest all disputes regarding the nature of vouchers and will confirm that vouchers are mere instruments and not supplies in themselves,” said Bipin Sapra, partner, EY.
The retail sector had asked the government for clarity following a ruling by the Karnataka Authority for Advance Rulings in the case of Premier Sales Corp. that held the vouchers were goods and therefore taxable.
On the table
A key item on the agenda is reducing tax rates on life and health insurance premiums. A group of ministers (GoM) set up by the council under Bihar deputy chief minister Samrat Chaudhary had suggested exempting insurance premiums paid for term life insurance policies from GST. Health insurance premiums paid by senior citizens as well as premiums for coverage up to Rs 5 lakh paid by all individuals could be exempted or face a reduced rate instead of 18% now. A final call on the issue is expected to be taken.
The GST Council is likely to discuss an increase in the tax rate on old electric vehicles (EVs). It could also debate rationalisation of the tax rate for about 148 items, including raising the levy on luxury watches, pens, shoes and apparel. Discussions could also include a separate 35% tax slab for so-called sin goods and tax cuts on food delivery platforms such as Swiggy and Zomato to 5% without input tax credit from the current 18% with credit, said the official cited. The four-tier GST slabs of 5%, 12%, 18% and 28% will continue. The 35% levy proposed by the GoM is outside of this. However, there are wide divergences on these issues among states, a state finance minister told ET. “These issues will require a deeper discussion…Some states are not keen on many changes,” he said, adding that some were even opposing exemption or reduction in tax on insurance products.
The council could give the ministerial panel looking into the future of compensation cess more time, until June 2025, to submit its report. The compensation cess, which is levied on goods falling in the 28% tax bracket, comes to an end in March 2026 and a call has to be taken on its future. The panel’s current tenure is till December 31.
