Changes to Tax Rate on Used EV, Major Changes in Insurance will be in Proposal Before GST Council
GST Council may increase tax on old and used vehicles, including EVs, to 18%.
The Goods and Service Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman will be met on December 21. The Group of Ministers made recommendations regarding insurance products and vehicle taxation. The GST Council is expected to consider a set of recommendations by a Group of Ministers on insurance products, which include lowering the GST rate on all individual health...
The Goods and Service Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman will be met on December 21. The Group of Ministers made recommendations regarding insurance products and vehicle taxation. The GST Council is expected to consider a set of recommendations by a Group of Ministers on insurance products, which include lowering the GST rate on all individual health insurance policies to 5 per cent, extending the exemption on health insurance for senior citizens, and introducing pure term life insurance.
The committee of officers suggested raising the rates to 18 per cent on all cars, including EVs (Electrical Vehicles). GoM favours a GST exemption for pure-term life insurance policies that cover family members. Exempting GST on these policies reduces the financial burden on policyholders. The committee further suggested waiving of GST on health insurance policies specifically for senior citizens and reducing the GST rate on all individual health insurance policies to 5 per cent but without the option for Input Tax Credit (ITC).
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The committee also made recommendation on old and used cars. As on date, GST is levied on the margin of the supplier. There are four categories of old and used cars for GST applicability. The first category includes petrol, LPG, and CNG cars with an engine capacity of 1200 cc or more and 4 meters or more long. The second category includes diesel-driven motor vehicles with an engine capacity of 1500 cc or more and a length of 4 meters. The third category has motor vehicles with an engine capacity exceeding 1500 cc, popularly known as Sports Utility Vehicles (SUVs), including utility vehicles. All these attract GST at 18 per cent. The fourth category is for all other vehicles, including EVs, and the rate is 12 per cent.
GST Council may increase tax on old and used vehicles, including EVs, to 18%. EVs currently enjoy a concessional 5% GST rate when sold new to promote the sunrise sector, their reclassification under the 18% slab when resold could make second-hand EVs less attractive to buyers.
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