Group of Ministers led by Bommai could review 18% rate on health insurance too 

A ministerial panel under the GST Council is expected to submit its recommendations on the reset of GST rates and slabs by April, and may review the tax levies on health insurance and restaurants as part of the exercise, a top Finance Ministry official said on Wednesday. 

The group of ministers, led by Karnataka Chief Minister Basavaraj S. Bommai, has been tasked with reviewing and rationalising GST rates on several goods and services as well as revisiting the multiple tax rates currently levied under the indirect tax regime.

‘Temper expectations’

Noting that the committee would ‘likely give its report within one or two months’, Revenue Secretary Tarun Bajaj, however, sought to moderate expectations about a significantly lower rate regime by citing States’ concerns about the outlook for revenue given that they would stop receiving GST Compensation from July. 

Responding to industry suggestions to pare the high 18% GST rate on health insurance, he advised them to flag the issue to the Bommai ministerial committee. 

“I take that point. I have myself worked in the insurance side and somewhat understand what you are saying but the only thing we need to see is that we don’t go the way some of the developed nations have gone, where the health costs go up not just because of inflation but because of insurance,” Mr. Bajaj said at an interaction with the Confederation of Indian Industry (CII). 

Proposals from the restaurant industry to revert to a higher tax bracket with input tax credits instead of a 5% GST without credits, as well as a request to reduce the GST Compensation Cess levied on coal, could be taken up at the GST Council, the official suggested. 

“I appreciate that the GST rate on some items need to be brought down to bring equity and parity with others, but there is also a need to look at the other side… States are going to face a massive shortfall of funds, maybe exceeding ₹1 lakh crore overall, so we need to look at that aspect as well,” he pointed out. 

“I am not at all saying because of that macro picture, we should not look at the micro adjustments that need to be made,” Mr. Bajaj underlined, after highlighting the gap between the original revenue neutral rate of 15.3% envisaged for GST and the currently effective rate of 11.6%.