GST: The conundrum in Reforms announced

  GST Reforms: Who is the beneficiary?
Aam Aadmi or Corporate?

GST Council, comprising finance ministers and representatives from both the state and central governments, implemented certain reforms to the existing policy, by reducing the slab rates to two (from four) and introducing a new 40% slab for goods and services that are considered luxurious/intoxicant/injurious to health. The move is being hailed as the most beneficial for a common man. Even before the dust set in, the first discrepancy cropped up, as exemption of GST on life and health insurance policies were restricted to individual insurance and reinsurance thereof. All India Retirees' Federation and two others filed a writ petition (WP) in the High Court of Kerala (high court), challenging the levy of GST on group health insurance policies. The petitioners also requested the high court to direct IBA (an association representing majority of the Indian Banks) and National Insurance Co. Ltd. to not to levy GST on insurance  premium paid/that will be paid by the retirees and pensioners, till disposal of the WP. (The respondents included GST Council, MoF and a few major banks). While the high court passed an interim order, staying recovery of GST on group health insurance policies, the order was modified on 31.10.2025, after hearing the submission of the legal counsel for the insurer. The modified order states that an undertaking should be furnished by the insured (beneficiaries) that in case of dismissal of the WP, the differential amount towards the applicable GST component would be paid by them.  So the Damocles' sword is still hanging on the retirees/pensioners.

While the high court will pronounce its verdict based on its opinion about the merits of the case in due course, my question is - Why the GST Council permitted exemption on health insurance/life insurance with a description "All individual health insurance/life insurance" only. (HSN Code 9971). Should it not have included the group insurance, where the premium is paid individually and the cover is also individual claim based? The central and state government representatives in the GST Council are very well aware that the pensioners/retirees are senior citizens and get covered under group health insurance policies only, in view of the exorbitant premium and too many riders placed on issue of individual health policies for those above 60. If the intent of the government was to encourage health insurance awareness among the senior citizens, the exemption should have been offered in the first place on group insurance. If it had concerns  on the loss of income on group insurance, it could have retained the GST  in such cases,  where the cost is borne by the organizations concerned, (by specifying clearly that 'the GST on such insurances, where the cost is borne by the organizations will continue')). Due to the failure on such a sensitive issue, the retirees  will have to pray for subsidization from their ex-employers (who are indifferent), in case the WP faces a dismissal in future. Will the government come to the rescue of the senior citizens by making necessary amendments?

2. There are other conundrums too in the GST reforms, that affect the common man.  For example, you continue to pay 5% GST even if you have to drink a coffee/tea in a small restaurant and eat food items, not prepared from wheat flour but made of rice, grams, etc. (Tariff item 1905/2106 exempts only bread, chapathi, roti). (Food preparations not elsewhere included (item 2106) are charged 5% GST, by citing that only bread is excluded). Again no distinction is made between provision store items which are procured and sold (brand items) and that are purchased in retail, packed by the retail store itself and sold. Both are levied 5% GST.

3. Are the reforms mainly intended to support corporates to boost the economy and the Aam Aadmi derives the benefit only incidentally? One tends to believe so, if the following factors are taken as indicators.

(i) When the international crude oil prices were on the rise, the retail prices of petroleum products were gradually increased to reflect the market price. When the crude oil price per barrel started its downward journey from the near USD100 levels, the retail prices, which crossed ₹100 in most of the states, never reflected the applicable market price. Now, for more than six months, the international crude oil price never crossed USD 70 (per barrel) mark and is mostly in the range of USD 65-70. Why the common man should continue to pay the higher price, fixed three years back? The small concession in the retail prices , in between, were also due to the central government's decision to reduce its tax/cess.

(ii) Auto Sector was the first to respond to the GST reforms by announcing big reduction in the prices of their products. In all the cases, the reduction,  at the maximum, matched the reduced GST rate applicable on the said products. Next visibility is now seen in electronic consumer goods, the story repeating that the difference in the pricing equals the reduced applicable GST. Definitely, this will aid in the growth of the GDP. But remember, the corporate did not reduce its price. And we feel obliged, if the entire GST reduction is passed on, without increasing the selling price ex GST in the process.

Regards

V. Viswanathan 
CGM Retd e-SBT 
2nd November 2025.