55th GST Council Meet On December 21: Key Tax Changes Expected For Common Men

The GST Council is set to hold its 55th meeting on December 21, 2024 (tomorrow) in Jaisalmer, Rajasthan to discuss significant tax changes that could impact individual taxpayers. With a broad agenda that includes rate rationalisation, relief measures for insurance premiums, and revision for tax rates of essential and luxury goods, the council is expected to deliberate on decisions that may affect your daily expenses and financial planning.

Here’s what is expected from the GST Council meeting tomorrow:

1) Relief on Health and Life Insurance Premiums

One of the most significant and long-anticipated discussions revolves around GST on health and life insurance premiums. The appeal for this change has seen massive political support over the last few months wherein leaders such as Nitin Gadkari and Mamata Banerjee have called for an exemption in the health and life insurance premiums.

Currently, the GST on life and health insurance premiums is 18 per cent. It is expected to be reduced to five per cent. This would mean a lower premium for policyholders. Among key agendas, this proposal calls for an exemption for senior citizens’ health insurance and term life insurance premium policies.

Says Shivashish Karnani, GST Division, DPNC Global, “The proposed changes by the Group of Ministers (GoM) are seen as a positive move, especially the proposed exemptions for senior citizens' health insurance and term life insurance policies. If this proposal gets approved, it will ease financial burdens on the elderly people and families seeking greater financial security.”

However, he adds that the decision of the council to continue imposing 18 per cent GST on health insurance premiums exceeding Rs 5 lakh is sparking concerns since this could raise healthcare costs for middle-class families, particularly for those who have pre-existing conditions or require specialised care.

“Moreover, if health insurance is exempted from GST for all or specified persons, the insurance companies would lose out on input tax credits to that extent and accordingly, the reduction in costs can be less than the amount of GST previously charged,” states Karthik Mani, Partner, Indirect Tax, BDO India.

2) GST Rate Rationalisation For Essential & Luxury Goods

The Council’s agenda also includes a review of GST rates on various consumer goods items including both essential and luxury goods.

On the one hand there;s a proposal to reduce GST on pre-packed drinking water (20L or more) and exercise notebooks from 18 per cent and 12 per cent, respectively, to 5 per cent. Such a reduction would lower costs for households and students alike.

According to Karnani, GST rates on Luxury goods that may be discussed in the 55th GST Council meeting are as follows:

1. GST on shoes costing above Rs 15,000 from 18% to 28%, and

2. Wristwatches priced over Ra 25,000 from 18% to 28%

This measure aims to boost tax collection but could strain consumers who purchase high-value products. However, Mani hopes that similar to the practice followed for hotels, such tax rates would be linked to actual sale price and not MRP, to avoid complications in the cases, where the products are sold at a price lower than the MRP.

3) GST on the Textile and Garment Sector

The textile industry may also see changes in GST rates, with readymade garments potentially falling into multiple slabs based on price. While this change would make the grass greener for manufacturers as it could reduce the accumulation of input tax credits for them, it might lead to higher prices for the end consumers.

The Council, with this move, wants to address the long-standing concern over the inverted duty structure, particularly concerning the textile and pharmaceutical sectors.

4) GST on Food Delivery Platforms

Food delivery platforms like Zomato and Swiggy are also under the scrutiny of the Council this time over the GST on delivery charges collected from customers. The Directorate General of GST Intelligence (DGCI) has issued notices to these platforms demanding around Rs 400 crore and Rs 350 crore, respectively, in GST dues for the period between July 2017 and March 2023.

The platforms, however, have argued that they merely facilitate deliveries through independent partners who fall below the GST registration threshold of Rs 20 lakh annual income.

The GST Fitment Committee is currently reviewing how delivery charges by food delivery apps should be classified under GST. The DGGI has raised concerns that these charges should be included as part of the food supply.

If these charges are categorised as part of the food supply, consumers may face higher costs due to the 18 per cent GST rate.

What Is At Stake for Citizens?

For an average taxpayer, the decisions from this meeting could have a significant impact on monthly budgets. Reduced GST rates on essentials like health and life insurance premiums, packed drinking water, and notebooks would offer some relief.

Simultaneously, higher taxes on luxury items and increased scrutiny of food delivery charges may lead to higher expenses in these categories.

As Karnani notes, “Taxpayers’ financial burden needs to be eased, especially in sectors like healthcare, which directly impact quality of life.” This meeting’s outcomes will set the tone for how GST rates evolve in the coming year, 2025, and its impact on the economic framework.