54th GST Council Meeting 2024: The GST Council in its latest meeting on Monday deferred the reduction or removal of Goods and Services Tax on the premium of life and health insurance. The finance minister-led panel met today and the meeting was attended by several state finance ministers and senior officials.
A broad consensus has been reached within the GST Council for the rate of life and health insurance to be reduced. However, modalities are to be decided in the next council meeting, Moneycontrol reported.
The reduction of GST rates on life and medical insurance was a key demand from the industry.
GST on health insurance premiums in India is currently 18%. This means that you pay an additional 18% on top of the premium amount when purchasing a health insurance policy.
There have been discussions and proposals to reduce this rate, as some argue that it discourages people from buying essential insurance policies.
The debate gained momentum after calls from various sections of society requesting a review of the 18% GST rate on what is termed as “uncertainties of life”.
Experts were of the view that while doing away with GST completely might not be feasible, it is believed that the government can look at rationalisation. Another way to expand this coverage to incentivise employers, both in the formal as well as informal sectors, is to extend health insurance to their workers.
The GST collection from health insurance premiums and life insurance premiums for FY24 was Rs 8,262.94 crore and Rs 1,484.36 crore respectively. Cumulatively, the GST premium is nearly Rs 10,000 crore.
Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co, had said, “The current GST rate on life and medical insurance premiums is 18% which further accelerates the affordability issue. Consequently, one of the key expectations from the 54th GST Council meeting is a reduction in tax rates or, ideally, the complete exemption of GST on life and health insurance premiums.”
“While a complete exemption of GST on insurance premiums might lead to challenges for the insurance industry due to potential ITC reversals under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017, the industry is hopeful that the 54th GST Council meeting will result in a significant reduction of the GST rate from 18% to a lower rate such as 5% or even 0.1%. This reduction would alleviate the tax burden on both insurers and policyholders.”
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