Central government proposes GST relief on health insurance premiums
The Group of Ministers (GoM) on insurance has recommended a GST exemption for individual life and health insurance policies. This follows a meeting where nearly all states supported the proposal. However, a mechanism is to be devised by the GST Council to ensure policyholders receive the full benefit of any GST reduction as suggested by the GoM. The final decision rests with the GST Council.
New Delhi: The central government is all for giving the exemption on the GST paid on the premium for individual life and health insurance policies, said the convenor of insurance GoM (Group of Minister), Samrat Choudhary, who is also deputy chief minister of Bihar. The 13-member group meeting on insurance held a meeting on Wednesday, August 20.
Presently, 18 percent of GST is levied on the premiums paid on the life and health insurance policies. The GoM on health and life insurance was set up in September to suggest tax rates. The panel constitutes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. The panel is entrusted and mandated to submit its report to the GST Council by October this year.
Group of Minister (GoM) Meeting
"The Centre's proposal is clear that individual insurance policies should be exempt from GST. This has been discussed, and the GoM report will be presented to the Council," said Choudhary, as quoted by PTI.
He further said, "All members have given their approval for lowering rates. Some states have given their own views." adding that the final call on the matter is to be taken by the GST council.
Approximately all of the state governments are in favour of the proposal. However, GoM asked the GST Council to take upon this matter and to devise a mechanism through which the GST rate cut is to be passed on to the end customers and users, said deputy chief minister Mallu Bhatti Vikramarka, one of the members of the GoM.
"We made it clear that the GST reduction benefit should go to policyholders and not companies, some mechanism has to be developed.''
"States wanted it (tax rate) to be brought down or exempt. At the same time many states told the (GoM) meeting that some mechanism must be developed so that the rate cut benefit reaches the people. The GST Council will decide a mechanism," said Vikramarka, as quoted by the PTI.
He further said that the government has to forgo about Rs 9700 crore of annual revenue if the government wishes to give the GST exemption.
Insurance penetration in India
The proposed step is set to help increase the insurance penetration in India, which currently stands at 3.7 percent of the total GDP as per the IRDAI Annual Report.
The proposal on Insurance GST exemption is part of the flagship GST reforms proposed by the central government under which goods and services taxes are to be structured into two slabs—a standard 5 percent slab and a merit 18 percent slab
In FY24, the GST collection through health insurance premiums stood at Rs 8,262.94 crore, while Rs 1,484.36 crore was collected through reinsurance premiums. The health insurance services fall under HSN code 997133 of GST.