The government is launching its second major change to the Goods and Services Tax (GST), known as "GST 2.0," starting today, which includes many reductions in tax rates.
GST Exemption on Life Insurance Policies: All personal life insurance policies are now free from GST. This covers term insurance, endowment policies, and unit-linked insurance plans (ULIPs). Reinsurance for these individual life policies is also included in this exemption.
GST Exemption on Health Insurance: Personal health insurance plans, which include family coverage and health policies specifically for senior citizens, are now exempt from GST under GST 2.0.
Tax Rates on Transportation Services: Road transportation for passengers will still be taxed at 5 percent without the option for input tax credit (ITC). Nonetheless, transport service providers have the option to pay 18 percent with ITC if they choose. For air travel, economy class tickets will still be taxed at 5 percent, while business and other higher-class tickets will continue to face an 18 percent tax rate.
GST on Local Delivery Services: When local delivery services are carried out through an e-commerce operator (ECO) by a service provider who is not registered, the tax responsibility shifts to the e-commerce operator. If the delivery service provider is registered under GST, that provider must pay the tax.
GST Rate on Local Delivery Services: Local delivery services will have a standard tax rate of 18 percent.
Why Medicines Are Not Fully Exempt from GST: The Finance Ministry explained why medicines remain taxed at 5 percent instead of being completely exempt. If medicines were entirely exempt, manufacturers wouldn't be able to claim ITC on costs like raw materials and packaging, which would increase their production expenses.
GST on Leasing and Renting: Leasing or renting goods without an operator is taxed at the same rate as the goods themselves. For instance, if a car sold is taxed at 18 percent GST, leasing that car without a driver will also incur an 18 percent tax. This rule applies to other goods as well.
GST Rates on Imports: The updated GST rates from GST 2.0 will also apply to imported goods. Integrated GST (IGST) will be charged at the new rates starting from September 22, unless there is a specific exemption announced.
Exemption for UHT Milk vs. Plant-Based Milk: Milk processed using Ultra High Temperature (UHT) from dairy sources is fully exempt from GST. However, this exemption does not apply to plant-based milk. So far, almond milk and similar beverages have been taxed at 18 percent, while soya milk was taxed at 12 percent. With GST 2.0, all plant-based milk beverages, including soya milk, will now have a uniform tax of 5 percent.
Reduction in GST on Face Powders and Shampoos: The tax on face powders and shampoos has been lowered. The Finance Ministry clarified that this reduction was not aimed at benefiting large companies but rather to make the GST system easier to understand.
