NEW DELHI: The Goods and Services Tax (GST) Council is set to discuss crucial matters that could reshape tax implications for mediclaim policies during its meet on September 9.
The meeting will focus on proposals aimed at rationalising the current GST structure, which currently imposes an 18% tax on mediclaim premiums, which many stakeholders argue is unsustainable for consumers and insurers alike.
As per sources, among the proposals under consideration are options to allow mediclaim companies to charge a reduced GST rate of 5% without the benefit of input tax credit (ITC) or to implement a uniform 5% rate specifically for business-to-consumer (B2C) supplies.
“In the interest of common people, the best way for the GST Council it seems would be that the GST rate on mediclaim be reduced to 5% or 12% with the benefit of ITC available to the suppliers of the policy. This would mean a pure vanila reduction of the GST rate for common people.
Insurance companies are duty bound to pass on this benefit as they can’t make profit from rate reduction due to anti-profiteering provisions under GST,” suggested Vivek Jalan, Partner at Tax Connect Advisory Services LLP.
As per sources, the Council may also announce extending GST amnesty scheme for another year i.e., FY21. However, all the states need to be in consensus on providing amnesty scheme for another year, say sources.
This paper had reported in August that the Ministry of Finance will issue a circular regarding the Amnesty scheme, recently proposed in Budget 2024. The scheme aims to provide relief to taxpayers by waiving interest and penalties under certain conditions for tax matters arising between July 1, 2017, and March 31, 2020.
In addition to these topics, the agenda may also include a discussion on the refund of excess payments made by the Centre to states during the GST compensation period. The issue of compensation has become increasingly pertinent as states continue to raise concerns about financial challenges.
Valuation of services for related-party payments
Another important item on the agenda will be clarification regarding valuation of payments for services received from related parties, in light of recent cases involving Infosys. This clarification is expected to provide much-needed guidance to businesses that engage in inter-company transactions under the GST framework.