Synopsis: The government has proposed exempting health and life insurance premiums from GST, aiming to ease financial pressure on individuals and families. The final decision will rest with the GST Council after reviewing the Group of Ministers’ (GoM) report.
In a major relief proposal for individuals and families, the government is considering removing GST on life and health insurance premiums. Currently, an 18% GST is levied on such policies, significantly adding to the cost of financial protection for households.
Bihar Deputy Chief Minister and convenor of the insurance GoM, Samrat Choudhary, announced the proposal on Wednesday, confirming that the Group of Ministers (GoM) has reached consensus on exempting these insurance products from GST. The GoM report will soon be submitted to the GST Council for final approval.
“The Centre's proposal is clear that the insurance sector's individual and family (policies) should be exempt from GST. All members have given approval for lowering rates, though some states have added their views,” Choudhary told reporters.
The move comes as part of the upcoming GST reform proposal, which also includes restructuring GST into two slabs – 5% and 18%, based on product categorisation into "merit" and "standard."
The 13-member GoM on health and life insurance, formed in September, includes finance ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. The panel has been tasked with submitting its recommendations to the GST Council by October end.
In FY 2023-24, the Centre and states collected ?8,262.94 crore through GST on health insurance premiums and ?1,484.36 crore on health reinsurance premiums. Exempting these products would provide significant relief to policyholders but may impact government revenues.
The final decision by the GST Council will determine whether life and health insurance policies move into the tax-free bracket.
Disclaimer: This article is for informational purposes only. The proposals are under consideration and subject to approval by the GST Council. Readers are advised to follow official notifications for final decisions.
