The Centre on Tuesday clarified that only reinsurance services will be exempted, but input tax credit (ITC) on tax paid on other inputs or input services will not be available for individual health and life insurance products, as these have been exempted from goods and services tax (GST).
It also clarified that bricks, except sand lime bricks to be taxed at 5%, will continue to attract GST of 6% without ITC and 12% with ITC.
Govt fresh clarifications on GST rate changes
To ensure a smooth transition to GST 2.0 for the industry, the government on Tuesday issued the second set of frequently asked questions (FAQs) on GST rate changes to be effective from September 22.
The FAQs address recurring problem areas such as how revision in MRP should be made for existing stock of medicines, how ITC must be handled where exemptions or concessional rates apply, and has clarified a few other points.
With respect to the pharma industry, the government has clarified that medicines must reflect the new GST rates in their MRP, but recalling or re-labelling existing stock issued before September 22, 2025 is not required, as compliance can be ensured by providing revised price lists to dealers/ retailers.
“However, the same issue will be faced by other sectors such as FMCG and companies in retail sector, the government should come out with a clarification for other sectors as well clarifying how reduced price can be passed on to the end customer on the stock already with retailers, dealers, without changing the MRP on the products,” said Rahul Shekhar, Partner- Indirect Tax, Nangia Andersen LLP.
The ITC reversal will become a cost for the insurance industry and will be absorbed by the industry, Shekhar said.
Benefits of a uniform 5% levy on drones
The uniform 5% levy on drones will not only simplify compliance but also catalyse wider adoption in agriculture, logistics, and industry, said Amit Maheshwari, Tax Partner, AKM Global.
“Reducing tax on sand lime bricks directly supports affordable housing and boosts construction demand,” Maheshwari said.
The Government has also explained that in the case of hotels, beauty and physical well-being industry, they cannot choose a higher rate with ITC on these services.
The Government wants the end customer to gets the maximum benefits out of these changes; therefore, it has not allowed a dual-rate structure for these industries, Shekhar said.