Government exempts individual life and health insurance policies from GST
The government on Wednesday announced GST rate cuts on several products including life insurance. The GST on health insurance products has been brought down to zero. The government hopes that this rate cut will encourage more and more families to buy health cover, thus improving overall health security of the people in the country.
New Delhi: The government has cut the Goods and Services Tax (GST) on health and insurance products to zero. Till now the GST on health insurance was 18 per cent. The announcement of the cut in GST was announced by Finance Minister Nirmala Sitharaman in a late night press conference on Wednesday.
Talking about the cut in GST rates, the Finance Minister said that the decision to reduce GST rates had been taken with consent from all Ministers. She added that the decision by the GST council was arrived at after all Ministers agreed to rate rationalization.
Rate cut and US tariffs
The announcement comes after Prime Minister Narendra Modi announced that the government was looking to simplify the tax regime, in his Independence Day speech.
The move by the government also comes at a time when the US has announced 50 per cent tariffs on Indian goods. This is one of the highest tariff rates imposed by the US on any country in the world.
NDTV quoted Finance Minister Nirmala Sitharaman as saying, "This was so much questioned last year. In parliament, Opposition members questioned, saying, 'You want to tax insurance premiums?' After a detailed study, taking stakeholders into confidence, we have come up with this so that families and also people who take individual insurance, get the benefit. Of course, we will make sure that companies pass on this benefit to people who are taking insurance. We want to give people who are looking to get medical insurance relief."
The panel on GST has simplified the current GST structure consisting of 4 slabs of 5, 12, 18 and 28 per cent, to just 2 rate structures of 5 per cent and 18 per cent. Apart from this, a special 40 per cent slab is proposed for high-end cars, tobacco and cigarettes.
The decision by the GST Council on insurance would bring down the overall premium people pay on health insurance, as the tax component has come down. The reduced rate of insurance may encourage more individuals and households to opt for health cover.
In 2024, the government had collected Rs 8,263 crore from health insurance and Rs 8,135 crore from life insurance.