The government is considering giving senior citizens a break from paying GST on their health insurance premiums. In addition, people paying premiums for term life insurance may also benefit from a GST exemption. This proposal has gained support from a group of ministers and is now awaiting final approval from the GST Council.
Lower GST on Essential Items
The government is also looking at reducing GST on everyday items. Packaged water (more than 20 liters), exercise notebooks, and bicycles priced under Rs 10,000 could see their GST rate drop to 5%. On the other hand, luxury items like shoes priced over Rs 15,000 and watches costing more than Rs 25,000 might face a higher 28% GST rate.
Impact on Insurance Premiums
If this proposal is approved, senior citizens won’t have to pay GST on their health insurance premiums. For others, health insurance plans with coverage up to Rs 5 lakh may also become GST-free. However, plans above Rs 5 lakh would still be taxed at 18%. Term life insurance plans that cover family members could also be exempt from GST, helping reduce costs for many people.
Balancing the Revenue
The government estimates a loss of around Rs 2,400 crore from these GST exemptions on insurance premiums. However, this will be offset by higher taxes on luxury goods like expensive shoes and watches, which could generate an additional Rs 22,000 crore in revenue for the state and central governments.
Ongoing Discussions on GST Rates
The ministers are still discussing other potential GST changes, including adjusting the tax rates on high-end items like cars and air conditioners, which are currently taxed at 28%. The goal is to provide relief on essential goods while increasing taxes on luxury items.
