GST Council’s December Meeting: Essential Goods Get Tax Breaks, Health Insurance Premiums in Focus

GST Council’s December Meeting: Essential Goods Get Tax Breaks, Health Insurance Premiums in Focus

Finance Minister Nirmala Sitharaman is set to convene the 55th GST Council meeting on December 21, 2024, in the historic city of Jaisalmer, Rajasthan. Originally slated for November, the meeting was postponed due to the Assembly elections in Maharashtra and Jharkhand and the ongoing Winter Session of Parliament.

This meeting will be crucial, as state finance ministers will present their recommendations for the upcoming 2025-26 Union Budget, which will be tabled in Parliament on February 1, 2025. Among the critical discussions, the Council is expected to focus on significant tax reforms, including the rationalization of GST rates on everyday goods. The goal is to lower the tax rate on several essential items, bringing them down from 12% to 5%, per a state-appointed panel’s recommendations.

The proposed rate cuts are part of a broader strategy to relieve daily necessities while raising taxes on luxury and “sin” goods. The Group of Ministers (GoM) tasked with the rate rationalization includes several prominent state leaders, such as Kerala’s Finance Minister KN Balagopal, Uttar Pradesh’s Finance Minister Suresh Kumar Khanna, Karnataka’s Revenue Minister Krishna Byre Gowda, West Bengal’s Finance Minister Chandrima Bhattacharya, and Rajasthan’s Medical and Health Services Minister Gajendra Singh.

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Currently, the GST framework operates with a four-tier structure—5%, 12%, 18%, and 28%—with essential goods typically taxed at the lowest rate or exempted entirely and luxury or demerit items subject to the highest tax bracket. In addition, a cess is levied on top of the 28% tax for luxury and sin products. However, with the average GST rate now dipping below the revenue-neutral rate of 15.3%, there’s growing consensus on the need for reform.
The Group of Ministers on Health and Life Insurance met in October 2024 and made significant headway. They broadly agreed to exempt GST on premiums for term life insurance policies and health insurance for senior citizens.

Similarly, premiums for individual health policies covering Rs 5 lakh will likely be exempt from GST. However, premiums for policies with coverage above Rs 5 lakh will continue to attract an 18% tax.
With these discussions in the pipeline, the upcoming GST Council meeting promises to be a pivotal moment for India’s tax structure, balancing the need for fiscal revenue with relief for consumers on essential goods and services.