Cost of Health, Life Insurance To Come Down If GST Council Plans To Reduce Taxes On Premium: FM

New Delhi: Finance Minister Nirmala Sitharaman on Monday said the cost of insurance for policyholders could come down if the GST Council recommended reducing the GST rate on health and life insurance policies.

FM Recommends Constituting GoM

In a written reply in the Lok Sabha, she said the GST Council in its September 9 meeting had recommended constituting a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on life insurance and health insurance.

"...The matter of review of GST rates on life and health insurance is pending before the GoM. If a recommendation for a reduction in GST rate is made by the GST Council, the cost of insurance to the policyholder is expected to come down on account of reduction in GST," she said.

Sitharaman said this while replying to the question of whether GST reduction on health insurance will be a step towards making healthcare more equitable.

Competitive Pricing To Bring Down Cost of Insurance

To a query on how the government will ensure that insurance companies pass on the benefits of any GST reduction to consumers, rather than retaining them through increased premiums, Sitharaman said competitive pricing would bring down the cost of insurance.

"As the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly especially in a competitive market with many insurers as the cost of insurance will reduce to that extent," she said.

Currently, an 18 per cent GST is levied on premiums paid for life and health insurance policies.

The GST Council, chaired by Sitharaman and comprising her state counterparts, is slated to meet on December 21 where the GoM report on reduction of GST on life and health insurance is expected to be discussed.

In the 2023-24 fiscal, the Centre and state governments collected Rs 16,398 crore GST from healthcare and life insurance policies. This included Rs 8,135 crore from life insurance and Rs 8,263 crore from health insurance.

Also, Rs 2,045 crore was raised as GST from reinsurance on life and health insurance last fiscal, including Rs 561 crore from reinsurance on life and Rs 1,484 crore on healthcare.

The GST Council is slated to meet on December 21 in Jaisalmer where it is expected to take up the issue of GST on life and health insurance The first meeting of the GoM on life and health insurance under Bihar Deputy Chief Minister Samrat Chaudhary was held on October 19.

Govt Broadly Agrees To Exempt THESE Insurance Premiums 

According to sources in the know, the GoM has broadly agreed to exempt insurance premiums paid for term life insurance policies and senior citizens' health insurance from GST.

Also, GST on premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh is proposed to be exempted. However, an 18 per cent GST will continue on premiums paid for policies with health insurance cover of over Rs 5 lakh. (with PTI inputs)