Health insurance: GST on premium must go
In its 54th meeting on Monday, the GST Council took some decisions which were expected and welcome, and deferred its decision on some other proposals. The tax rate on several items were adjusted. It lowered the rate on some cancer drugs from 12% to 5%, and on some industrial products from 18% to 12%. It did well to exempt from GST research and development grants from the private and public sectors to recognised educational institutions. Show-cause notices had been issued on several institutions on unpaid taxes. These had raised questions about the government’s attitude to research and development. The relief will be widely welcomed. The Council also took some decisions intended to make the system more efficient and improve tax collections.
On some other issues, the Council thought wider studies were required, and GoMs (Group of Ministers) are to deliberate on them. A final decision will be made on the basis of their recommendations. One of them is the GST on insurance, over which there has been much discussion in recent weeks. There is strong demand for a review of the 18% tax levied on premium payments. It was voiced by Union Minister Nitin Gadkari, and by the BJP’s allies, too. There seems to be a change in the government’s stance now and a new GoM is expected to make a recommendation in a few weeks, to be considered by the Council meeting in November. Health insurance penetration in the country is very low for various reasons, including the high premiums. The public health infrastructure is grossly inadequate and hospitalisation expenses and the premia have increased after the Covid pandemic. There are several proposals on how to effect changes in the levy and hopefully the decision will give the best relief to the widest section of people.
Other issues under consideration are the GST compensation cess and rate rationalisation. The compensation cess was intended to compensate states for any loss in revenue, measured against their guaranteed revenue. It was to be levied till June 2022 but was extended till March 2026 to repay the loans taken to compensate states for shortfalls in revenue during the Covid period. The Council will now have to decide on whether the levy of the cess will continue and in what form. A GoM has been formed to go into the matter. There are different views on rate rationalisation. There is a strong view that the current structure of multiple slabs adds to the complexity of the tax system and goes against the aim of the GST. The GoM on the issue is expected to a take a decision on it. It is slated to meet this month.