Aakhir Tak – In Shorts
The GST Council is considering removing GST on life and health insurance premiums. This change could provide relief to policyholders. Health insurance premiums for senior citizens may be entirely exempt from GST.
Aakhir Tak – In Depth
In India, the GST Council is contemplating the removal of GST on life and health insurance premiums. If implemented, this proposal could serve as a relief source for policyholders and support the insurance sector. Currently, an 18% GST is levied on life and health insurance premiums.
However, the Council is exploring ways to reduce this burden, especially for senior citizens and those with lower health coverage. The proposal suggests that health insurance premiums covering up to ₹5 lakh for individuals may be exempted from GST, while premiums for coverage exceeding ₹5 lakh would continue to attract the current 18% tax.
Moreover, for senior citizens, health insurance premiums could be entirely exempt from GST.
The Council is also considering exemptions on GST for life insurance premiums, including term policies and family floater plans, which are currently taxed at 18%.
An official stated, “GoM members are broadly on board for cutting rates on insurance premiums. A final decision will be taken by the GST Council.”
Many members of the Council support reducing GST on insurance premiums, believing it will provide financial relief to the public and encourage more people to invest in life and health insurance.
The exemption for health insurance premiums for senior citizens could have an estimated revenue impact of approximately ₹2,200 crore, while the exemption for term life insurance premiums is estimated to cost around ₹200 crore.
RC Sankhla, former Chief Commissioner, mentioned, “The reduction in 18% GST on insurance services is likely to make premiums cheaper, thus more attractive to common people.”
Tax expert Sandeep Agrawal suggested that a lower premium rate would benefit buyers and help increase insurance penetration in India.
A 13-member Group of Ministers (GoM) was formed to examine this issue. This group is expected to submit its final report to the Council by the end of October.
