The GST Council on Monday (September 9, 2024) is expected to deliberate on a host of issues, including taxation of insurance premium, GoM’s suggestions on rate rationalisation, and a status report on online gaming, sources said.

Sources claimed the fitment committee, comprising Centre and State tax officials, will present a report on GST levied on life, health and reinsurance premiums and the revenue implications.

The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state ministers, will decide on whether to reduce the tax burden on health insurance from the current 18% or exempt certain categories of individuals, like senior citizens.

The deliberations will also happen concerning the goods and services tax (GST) cut on life insurance premium.

In 2023-24, the Centre and States collected ₹8,262.94 crore through GST on health insurance premiums, while ₹1,484.36 crore was collected on account of GST on health reinsurance premium.

The issue of taxation on insurance premiums figured in Parliament discussions with opposition members demanding that health and life insurance premiums be exempt from GST. Even Transport Minister Nitin Gadkari wrote to Ms. Sitharaman on the issue.

Finance Minister Nirmala Sitharaman in her reply to the discussion on the Finance Bill had said 75% of the GST collected goes to states and opposition members should ask their State finance ministers to bring the proposal at the GST Council.

West Bengal Finance Minister Chandrima Bhattacharya had raised the issue in the meeting of the Group of Ministers (GoM) on rate rationalisation last month and the matter was referred to the fitment committee for further data analysis.

The GoM had opined against any tinkering with a four-tier GST slab of 5, 12, 18, and 28% for the time being. The panel, however, had asked the fitment committee to look into any scope for rationalisation of rates of goods and services.

Regarding online gaming, Centre and State tax officers will present a “status report” before the GST Council. The report would include GST revenue collection from the online gaming sector before and after October 1, 2023.

From October 1, 2023, entry-level bets placed on online gaming platforms and casinos were subject to 28% GST. Before that, many online gaming companies were not paying 28% GST, arguing that there were differential tax rates for games of skill and games of chance.

The GST Council in its meeting in August 2023 had clarified that online gaming platforms were required to pay 28% tax and subsequently Central GST law was amended to make the taxation provision clear.

Offshore gaming platforms were also mandated to register with GST authorities and pay taxes, failing which the government would block those sites.

The council had then decided that the taxation on the online gaming sector would be reviewed after six months of its implementation.

Sources said the Council would deliberate on the status of taxation on the sector and any change in tax rates is unlikely.

Besides, the Council is likely to be apprised about the ongoing drive against fake registration, the success of the drive, and action taken against such entities. The total amount of suspected GST evasion would also be presented before the Council.

The drive, from August 16, 2024, to October 15, 2024, is aimed at detecting suspicious/fake GSTINs and to conduct requisite verification and further remedial action to weed out these fake billers.

In the first drive between May 16, 2023, to July 15, 2023, against fake registration, 21,791 entities (11,392 pertaining to state tax jurisdiction and 10,399 pertaining to CBIC jurisdiction) having GST registration were discovered to be non-existent.

An amount of ₹24,010 crore (State – ₹8,805 crore + Centre – ₹15,205 crore) of suspected tax evasion was detected during the special drive.

Also, the Council would approve notifications, including that of the amnesty scheme, announced in the last council meeting. The various amendments to GST law decided by the council in its previous meeting on June 22 were passed by Parliament last month vide Finance Act, 2024.

The council’s June meeting took a host of taxpayer-friendly measures, including waiver of interest and penalty for demand notices issued in the first three years of GST — 2017-18, 2018-19, and 2019-20 — if the full tax demanded is paid by March 31, 2025.

To reduce litigation, a monetary limit for tax officers, to file appeals before the GST Appellate Tribunal, the High Court and the Supreme Court was fixed at ₹20 lakh, ₹1 crore and ₹2 crore, respectively, by the Council.

It also recommended a reduction of the quantum of pre-deposit required to be paid by taxpayers for filing of appeals under goods and services tax (GST).

Union Finance Minister Nirmala Sitharaman. File
| Photo Credit: K. Murali Kumar

Finance Minister Nirmala Sitharaman on Wednesday (August 21, 2024) asked tax officers to use simpler words in notices or letters they sent to taxpayers and exercise power bestowed upon them judiciously.

Addressing the 165th Income Tax Day celebrations, Ms. Sitharaman said that after adopting the faceless regime, the tax officers must now aspire to be more “fair and friendly” in their dealings with taxpayers.

The tax notices should not trigger a “sense of fear” among the taxpayers and instead, it should be simple and straightforward, she added.

The notice should make it “crystal clear” to the assessee the reason for which a notice was being sent to him/her, the minister noted.

Ms. Sitharaman also said there was room for improvement in issuing refunds faster.

Asking taxmen to avoid “ham-handed ways” in dealing with taxpayers, the minister said that the action taken should be proportionate to the issue at hand.

She also asked taxpayers to use enforcement measures only as a last resort, and the goal of the department should be to encourage voluntary compliance.

The minister also underlined that when she says that the tax department should be more friendly and transparent, it does not mean that the tax officers were unfair all these years.

“Can we explore issuing simple and easy-to-understand notices? Explain the reason behind why the action was taken and why the notice was being sent,” Ms. Sitharaman said.

Stating that she would stand with the tax department, the minister said that tax officers should continue to perform their sovereign duties.

Union Finance Minister Nirmala Sitharaman addresses the officers of the Income Tax department from Madhya Pradesh and Chhattisgarh region, in Bhopal.
| Photo Credit: ANI

Union Finance Minister Nirmala Sitharaman said on Tuesday that she wished she could bring down the taxes in the country to “almost nil” but India’s challenges are severe and they have to be overcome.

Ms. Sitharaman made the statement while addressing students at the 11th convocation ceremony of the Indian Institute of Science Education and Research (IISER) in Bhopal.

She said the government has invested heavily in the renewable energy sector and that India is leading in implementing the commitments given in various climate-related conferences like the COP summits.

“The world has promised a lot of money towards transitioning from fossil fuel to renewable energy but that money is yet to come. But India didn’t wait. The promises given in Paris (Paris Agreement) were fulfilled with our own money. There are times when being the Finance Minister, it doesn’t give me motivation when I have to answer people about why our taxes are like this. Why can’t we even be lower than this? I wish I can bring it down to almost nil. But India’s challenges are severe and challenges will have to be overcome,” she said.

“The government is not just talking. It’s putting money into R&D (research and development). I will emphasise and give you some data on that so that you have the confidence that this country and the money it earns out of taxation,” she said, adding that it was her job to generate revenue but not to trouble people.

Ms. Sitharaman highlighted that the country needs money to be able to fund research. “Anyone who disagrees? Do we need to fund research or not?” Mr. Sitharaman asked the crowd.

Sharing insights into the government’s funding for various research and innovation initiatives, Ms. Sitharaman said that in the Interim Budget of 2024, before the Lok Sabha elections, the government announced the establishment of an ‘Anusandhan Kosh’, a corpus of ₹1 lakh crore to provide long-term financing to support research and innovation in sunrise domains.

“We are strengthening Deep-Tech technologies, which will help the Defence Sector become ‘Aatmanirbhar’. ‘Innovation, Research & Development’ is one of the key priorities of our government’s policies for making sure India becomes a developed nation by 2047,” she said.

“We recently approved the ‘India AI Mission’ with a budget outlay of ₹10,300 crore for building computing infrastructure, developing indigenous AI capabilities, attracting AI talent, and financing AI start-ups,” she noted.

“The National Green Hydrogen Mission launched in January 2023 has an outlay of around ₹20,000 crore for 5 years, that will make India a global hub for the production, usage and export of Green Hydrogen and its derivatives and enable India to be energy independent by 2047,” she said.

The Finance Minister said that under the India Semiconductor Mission, launched in 2021, the work has already begun on three units for assembling, testing and packaging of semiconductor chips. “They’re being setup in Gujarat and Assam. More States are coming forward for the same,” she said.

She also attended an interactive session with the Income Tax officers of the Madhya Pradesh and Chhattisgarh region.

Union Finance Minister Nirmala Sitharaman. File
| Photo Credit: PTI

Finance Minister Nirmala Sitharaman on Saturday (August 10, 2024) asked banks to come up with innovative and attractive schemes to mobilise deposits.

Addressing the media after the board meeting of the Reserve Bank of India, she said that deposits and lending are the two wheels of a cart and “deposit is moving slowly.”

The banks, she stressed, need to focus on core banking business which is mobilising deposits and lending to those who need funds.

In order to overcome the mismatch between deposits and lending, Ms. Sitharaman asked banks to come up with “innovative and attractive” deposit schemes to mobilise funds from the people.

RBI governor Shaktikanta Das said that interest rates are deregulated and often banks raise deposit rates to attract funds. “Banks are free to decide on interest rates”, Mr. Das added.

RBI governor Shaktikanta Das while unveiling the bi-monthly monetary policy earlier in the week, also had expressed concern of deposit-lending mismatch in the banking sector.

He had said that banks were taking greater recourse to short-term non-retail deposits and other instruments of liability to meet the incremental credit demand.

This, he warned, “may potentially expose the banking system to structural liquidity issues. Banks may, therefore, focus more on mobilisation of household financial savings through innovative products and service offerings and by leveraging fully on their vast branch network.”

Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha on August 8, 2024. Photo: Sansad TV via PTI

The Union government has nothing to do with imposing the goods and services tax (GST) on health insurance premiums, Finance Minister Nirmala Sitharaman insisted in the Rajya Sabha on Thursday (August 8, 2024), maintaining that the issue is entirely in the realm of the GST Council, which includes representatives from all State governments.

“Before GST too, medical insurance premiums were taxed,” she noted, during her reply to a debate on the Finance Bill. The Upper House returned the Bill following her reply, completing the process of approving the Union Budget for this financial year.

Countering charges that the Centre is pocketing the GST on health insurance premium, Ms. Sitharaman accused the Opposition of trying to gain political points on the issue. “Let the GST Council take a call,” she said, adding that every State levied taxes on health insurance premiums.

‘Write to State FMs’

Noting that the GST Council has discussed the issue thrice in the past, she said that the Finance Ministers of all States were present in the GST Council where decisions are taken by consensus. MPs who were protesting the tax with placards in Parliament must instead write to Finance Ministers in their respective States. “What stopped you?” she asked.

Objecting to allegations that the GST on health insurance premiums is “daylight robbery”, the Finance Minister pointed out that 50% of the GST collected goes to the States, and out of the Centre’s 50% share as well, 41% is given to the States.

Opposition members had also raised Union Minister Nitin Gadkari’s letter to Ms. Sitharaman on the matter. Without naming Mr. Gadkari, she said that the Opposition had got an opportunity to raise the issue with “some Ministers” writing a letter, claiming that “somebody” who was part of a delegation had put it out in the public domain without the Minister’s permission.

Balancing priorities

Ms. Sitharaman reiterated that the Union Budget balances several overriding imperatives, including growth, employment generation, capital investment, and fiscal consolidation. “We have tried to balance all these without compromising on any one sector,” she said.

The allocation for agriculture and allied sectors has increased in this Budget, the Finance Minister said. “₹1.44 lakh crore was the allocation last year, this time it has gone up to ₹1.52 lakh crore, that is ₹8,000 crore more,” she added. Ms. Sitharaman also questioned the conclusions of the Global Hunger Index, claiming that the report had been prepared without proper data from India.

Finance Minister Nirmala Sitharaman replies to the debate on the Finance Bill in the Lok Sabha on August 7, 2024. Photo: SansadTV via ANI

The Finance Bill 2024 was passed in the Lok Sabha on Wednesday (August 7, 2024) with an amendment relaxing the recently introduced new capital gains tax on real estate. It allows tax payers an option to switch to a new lower tax rate or stick to the old regime that had higher rate with indexation benefit.

The amendment comes after a proposal to remove indexation benefit in calculation of long-term capital gains on sale of immovable properties in the Budget 2024-25 had evoked criticism from various corners, including Opposition parties and tax professionals. The Budget had proposed a lower 12.5% rate of LTCG tax, down from 20%, while doing away with the indexation benefit.

With this amendment, individuals or Hindu Undivided Families (HUFs) who bought houses before July 23, 2024, can opt to pay LTCG tax under the new scheme at the rate of 12.5% without indexation or claim the indexation benefit and pay 20% tax.

The Finance Bill 2024 was passed by a voice vote in the Lok Sabha with a total of 45 official amendments.

Replying to the debate before the passage of the Bill, Finance Minister Nirmala Sitharaman, rejected criticism from Opposition parties that the middle class was heavily taxed. She said that the Budget proposals were aimed at promoting investment and benefiting the middle class.

She said that the Narendra Modi government had brought in a simplified taxation regime and eased compliance without drastically increasing taxes.

Among the various measures taken to help the middle class, Ms. Sitharaman mentioned the reduction in customs duty on various goods that would promote trade and investment and generate employment. She also referred to the hike in tax exemption limit on long-term capital gains in listed equities and bonds to ₹1.25 lakh from ₹1 lakh, a move that she said would benefit those investing in the stock market.

The Finance Minister said that simplification of the tax regime was the primary objective of the Modi government , highlighting that 72% of those who had paid income tax had opted for the new regime while filing returns this year.

“We have made transformational changes in tax governance. In 2023, the tax slabs were significantly reduced. Again, this has been done this year,” Ms. Sitharaman said, adding that the standard deduction for the salaried class had been increased.

On the Opposition’s demand for removal of Goods and Services Tax on health and life insurance premiums, the Union Minister said that 75% of the GST collected goes to States.

“Prior to levying 18% GST on health insurance [premium], all States used to levy tax on insurance premiums. So when GST was rolled out, the tax automatically got subsumed into GST,” she said.

Opposition MPs staged a walkout after a furore over the government not taking up an amendment in the Finance Bill to withdraw the 18% GST levy on medical and life insurance premiums. The amendment had been moved by N.K. Premachandran of the Revolutionary Socialist Party.

The Finance Minister said any amendment in GST had to be approved by the GST Council.

Union Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha during the Monsoon session of Parliament on July 31, 2024.
| Photo Credit: PTI

Replying to the debate on the Union Budget in Rajya Sabha on Wednesday where more than 80 elders participated, Union Finance Minister Nirmala Sitharaman said the transfer of resources to the States is going unhindered and the inferences that she mentioned just two States in the budget was a propaganda created by the INDIA bloc to mislead the people.

Comparing the allocation to various social sectors and the devolution of taxes to the States under the UPA and NDA regimes, she said the Narendra Modi-led government implemented the concept of cooperative federalism by giving due share to all States.

Countering the allegation that the Budget mentions just two States, Andhra Pradesh and Bihar, Ms. Sitharaman said the Opposition created a propaganda to mislead people. “The Budget is for all States,” she said adding that the practice of mentioning the names of all States was not there during the UPA regime too. “If a State has not been mentioned in the speech, it does not mean there is no allocation for it,” she said.

She said it was wrong to calculate devolution based on gross tax receipts, and then allege that the Centre is devolving less than what is suggested by the Finance Commission. “I would like to underline our unflinching commitment to cooperative federalism. The total resources proposed to be transferred to the States in 2024-25 are estimated at ₹22.91 lakh crore. This actually entails an increase of ₹2.49 lakh crore over 2023-24,” she said.

Ms. Sitharaman said the capital expenditure too increased manifold during the last 10 years. The capital expenditure, she said, is estimated at ₹11.11 lakh crore. “This is the biggest ever allocation for capital expenditure and it shows increase of about 17% over the revised estimates and provisional actuals of 2023-24,” she said and added that during the 10 years of the UPA, it was ₹13.19 lakh crore. “Whereas during our tenure from 2014 to 2024, the allocation for capex has been ₹43.82 lakh crore from 2014-15 to 2023-24,” she said.

Replying to the discussion on the Budget of Jammu and Kashmir, she said the financial condition of the Union Territory has improved in the last two years. Earlier practices of running ‘hundis’ and overdrafts from J&K Bank have been discontinued and the day-to-day cash management is much healthier than the past, she said. “During the last four years, J&K Bank has made a remarkable turnaround. From a loss of ₹ 1,139 crore in 2019-20, the bank had a profit of ₹1,700 crore in the year 2023-24,” she added.

On the conduct of NEET medical entrance tests, she said the entrance examination has ensured cost-effective medical education for families. “Certainly, it has hurt some vested interests, particularly those in the medical education field because no longer selling medical seats is possible. Therefore, it has hurt a lot of people. That is why a particular lobby was actively against NEET even before this NEET leak issue has come up,” she said.

On the Agnipath military recruitment scheme, the Minister said the scheme will ensure that India has younger soldiers who are on the frontline. “One of the expected outcome of the scheme is that armed forces will have a much younger force by recruiting those in the age group of 17.5-21 years,” she said. “And I don’t think there is a need for us to unnecessarily worry that this is causing some kind of distortion. Not at all. It is with the acceptance of the armed forces that it has been brought in,” Ms. Sitharaman added.

Amid criticism of Budget 2024 from several quarters, Union Minister and senior BJP leader Nitin Gadkari has written to Finance Minister Nirmala Sitharaman, requesting her to withdraw the GST imposed on premiums for life and medical insurance plans.

Mr Gadkari has said in his letter that he is writing to the Finance Minister following a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union.

“Main issue raised by the Union is related to withdrawal of GST on Life and Medical Insurance Premium. Both life insurance and medical insurance premiums attract a GST rate of 18 per cent. Levying GST on life insurance premium amounts to levying tax on the uncertainties of life,” the Road Transport and Highways Minister has written.

“The Union feels that the person who covers the risk of life’s uncertainties to give some protection to the family should not be levied tax on the premium to purchase cover against this risk. Similarly, the 18% GST on medical insurance premium is proving to be a deterrent for the growth of this segment of business, which is socially necessary. Therefore, they have urged withdrawal of GST as mentioned above,” he has added.

Mr Gadkari said the union that met him also raised points related to differential treatment to savings by way of life insurance, re-introduction of IT deduction for health insurance premium and consolidation of public and sector general insurance companies.

“In view of the above, you are requested to consider the suggestion of Withdrawal of GST on Life and Medical Insurance Premium on priority as it becomes cumbersome for the senior citizens as per rules with due verification along with other relevant points raised,” the former BJP has said in his letter to Ms Sitharaman.

Mr Gadkari’s letter to the Finance Minister comes amid criticism from several quarters over the first Budget of the third Narendra Modi government, presented last week. While the Opposition has accused the Centre of being generous only to states ruled by its key allies TDP and JDU, a section of social media users have pointed to high tax rates for the salaried class.

The Finance Minister has trashed the Opposition’s charge, saying the Centre has provided funds to all states. She has said that if the name of a state is not mentioned in the Budget speech, it does not mean it is not covered. The BJP has said policy priorities of the Budget suggest that it has a long-term goal of ‘Viksit Bharat’ — making India a developed nation — by 2047.

As the dust settles on the proposals that the Finance Minister made in the Budget earlier this month, some aspects have become clearer while questions remain on others.

Budget 2024-25 saw several initiatives around employment and skilling being proposed. Do these form a good first step in addressing the jobs challenge the country faces? Or should the government have begun addressing the problem at the level of primary school and worked upwards?

Guest: Amit Basole, Professor of Economics at Azim Premji University

Host: K. Bharat Kumar

Edited by Jude Francis Weston

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Nirmala Sitharaman’s facepalm moment in Lok Sabha is all over the internet. It happened when Rahul Gandhi mentioned the traditional pre-Budget ‘Halwa’ ceremony and the lack of diversity in the exercise – an absence of Dalits, Other Backward Classes, Adivasis in its preparation.

The BJP hit back at the Leader of Opposition over his criticism of the government’s alleged neglect of Scheduled Castes, Scheduled Tribes and OBC, claiming the Congress’ history is “replete with instances of obstructing reservation” for these communities. It also accused the Congress of being “anti-Hindu”.

Mr Gandhi, displaying a picture of the ‘Halwa’ ceremony, said 20 officers worked on preparing the country’s budget and of them, only one was from a minority community and one from the Other Backward Classes (OBC).

“20 officers have prepared the budget of India, in which there is only one minority and one OBC. The budget halwa is being distributed, but 73% of the country’s people are not included in it,” said Mr Gandhi.

At this point, the Finance Minister placed her hands over her face. A disapproving nod followed.

The reaction was not lost on the Congress leader.

“The Finance Minister is laughing. It is quite astonishing. This is not a laughing matter, madam. This is about caste census. It will change the country,” said Mr Gandhi.

Mr Gandhi claimed the sole aim of the Budget is to strengthen the framework of big businesses, political monopoly that destroys the democratic structure, and the deep state or the agencies.

Pushing back, BJP national general secretary (organisation) B L Santhosh posted on X pictures of the Rajiv Gandhi Foundation’s board members which included Sonia Gandhi, Rahul Gandhi, Priyanka Gandhi Vadra, former prime minister Manmohan Singh, P Chidambaram, and asked which of them belong to OBC, SC and ST categories.

“Rajiv Gandhi Foundation Board for your perusal. Identify OBCs, SCs and STs for the use of the Congress and its troll army,” he wrote on X along with a screenshot of the foundation’s website showing its board members.

BJP IT department head Amit Malviya alleged the Congress has been “anti-SC/ST and OBC” since Independence.

“It was the Congress which kept (the) Kelkar Committee recommendation (for Backward Commission) made in 1957 in cold storage until PM Modi gave constitutional status to the OBC Commission in 2018, that too despite Congress’ opposition,” said Mr Malviya.

Rahul Gandhi drew parallels from the Mahabharata, and attacked the Bharatiya Janata Party over the Budget saying that there’s an atmosphere of fear in the country, adding that the country is now trapped in a “Chakravyuh of lotus,” referring to the BJP’s symbol.