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Below the Inputs on expectation from GST Council: On Insurance; Cross-Border Transactions; and Compensation Cess by Mr. Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co.

Reduction of GST rates on Life and medical insurance:

"Despite being the world's most populous country, India ranks among the lowest in terms of life and medical insurance coverage per capita. Also, the percentage of the Indian population with insurance coverage is substantially lower than that of many developed nations like the United Kingdom and the United States.

The current GST rate on life and medical insurance premiums is 18% which further accelerate the affordability issue. Consequently, one of the key expectations from the 54th GST Council meeting is a reduction in tax rates or, ideally, the complete exemption of GST on life and health insurance premiums.

While a complete exemption of GST on insurance premiums might lead to challenges for the insurance industry due to potential ITC reversals under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017, the industry is hopeful that the 54th GST Council meeting will result in a significant reduction of the GST rate from 18% to a lower rate such as 5% or even 0.1%. This reduction would alleviate the tax burden on both insurers and policyholders."

GST on Cross-Border Transactions Between Indian Companies and their Foreign Branches

"There is a lot of ambiguity on the transactions between branches of Indian companies and their foreign branches/head offices. Challenges arose when the tax department issued GST notices for crores of rupees to taxpayers such as Infosys, various foreign airlines including British Airways, Lufthansa, and Emirates, primarily related to unpaid GST on the import of services by Indian branches from their head offices/branches outside India. Therefore, clarification on these matters is expected from the upcoming GST Council meeting."

Compensation Cess:

"The GST Compensation Cess was incorporated to address States concerns & belief of revenue shortfall post GST implementation. This measure was initially temporary and only intended to last for the initial five years of GST inception. Later it was further extended by the GST council till March 2026. The ensuing GST Council meeting has an option to either stop collecting the cess or continue it till March 2026."

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