Ongoing 55th GST Council meeting: Key tax changes on insurance, food, and luxury goods!

The ongoing 55th GST Council meeting, taking place on December 21, 2024, in Jaisalmer, Rajasthan, is set to result in several significant decisions affecting various sectors. Chaired by Finance Minister Nirmala Sitharaman, the meeting is currently addressing recommendations from a Group of Ministers (GoM) regarding tax rate adjustments and other GST-related matters. Below is a comprehensive overview of the key discussions that are currently underway:

Key Discussions

1.Insurance Taxation

The Council has deferred its decision on reducing tax rates for life and health insurance premiums. There have been ongoing discussions about exempting term life insurance premiums from GST and offering exemptions for health insurance premiums for senior citizens and individuals with coverage up to ₹5 lakh. A further review by the GoM is expected in January 2025 to finalize these recommendations.

2.Tax Rates on Food Products

The GST rates on various popcorn products are under review:

>5% GST on ready-to-eat popcorn mixed with salt and spices if not pre-packaged.

>12% GST on pre-packaged and labeled popcorn.

>18% GST on caramel popcorn, classified as confectionery.

3.Used Cars and Electric Vehicles (EVs)

A proposal to increase the tax rate on the sale of used cars, including electric vehicles, from 12% to 18%, is currently being discussed. However, individual sales and purchases of used cars will continue to attract the lower rate of 12%.

4.Construction Materials

The GST rate for Autoclaved Aerated Concrete (AAC) blocks containing over 50% fly ash is being considered for a reduction from 18% to 12%. Additionally, there is a proposal for a uniform 5% GST rate on fortified rice kernels, simplifying the previous complexities around their taxation.

5.Aviation Turbine Fuel (ATF)

While there have been discussions on the inclusion of ATF under the GST regime, no final decision has been made yet. This issue remains under consideration due to its significant impact on the aviation sector.

6.Rate Rationalization for Luxury Goods

The Council is reviewing a proposal to increase GST rates for luxury goods and sin products such as tobacco and aerated beverages to 35%, which would include an additional cess. This measure is aimed at boosting revenue generation while discouraging the consumption of these products.

7.Food Delivery Services

A proposal to reduce the GST on food delivery platforms like Swiggy and Zomato from 18% (with input tax credit) to 5% (without input tax credit) is under discussion. The intention behind this change is to make food delivery services more affordable for consumers.

8.Future Steps

The GoM will continue to work on insurance taxation and other pending issues, with additional meetings planned to build consensus among states regarding proposed changes.

The 55th GST Council meeting has sparked critical discussions regarding tax rate adjustments across various sectors, including insurance, food products, and luxury goods. Although some decisions have been deferred for further consideration, the ongoing deliberations reflect a concerted effort to streamline India's GST framework and improve compliance while addressing revenue requirements. Future meetings of the GoM will aim to finalize recommendations that align with both consumer interests and fiscal objectives.