According to Finance Minister Nirmala Sitharaman, if the GST Council suggests lowering the GST rates on life and health insurance plans, insurance premiums might go down.
In a response to the Lok Sabha, she stated that the GST Council established a Group of Ministers (GoM) at its September 9 meeting to thoroughly examine GST matters pertaining to life and health insurance.
Insurance Premiums To Be Reduced: FM Nirmala Sitharaman
It is anticipated that policyholders’ insurance costs will decrease if the GST rates on these products are lowered.
In response to a query on GST reduction as a step toward universal healthcare, Sitharaman affirmed the possible advantages of the measure.
She underlined that competitive pricing will inevitably result in lower insurance rates when asked how to guarantee that insurers pass on the advantages of the GST cut to customers.
In a competitive market, Sitharaman clarified, reducing GST will directly benefit policyholders by bringing down the cost of insurance premiums.
At the moment, life and health insurance premiums are subject to an 18% GST.
In her words, “…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 policy holder is expected to come down on account of reduction in GST”
GST Council To Meet On December 21 To Review GoM’s Recommendations
On December 21, the GST Council, which Sitharaman chairs, will meet to review the GoM’s recommendations on GST reductions for health and life insurance.
Life and health insurance policies generated ₹16,398 crore in GST receipts during the 2023–24 fiscal year, which included ₹8,135 crore from life insurance and ₹8,263 crore from health insurance.
Furthermore, ₹2,045 crore in GST was collected from life and health insurance reinsurance, of which ₹561 crore came from life and ₹1,484 crore from healthcare.
On October 19, the GoM on life and health insurance met for the first time under the direction of Bihar Deputy Chief Minister Samrat Chaudhary.
According to sources, the GoM has mostly decided to exclude the premiums for senior citizens’ health insurance and term life insurance policies from GST.
Additionally, it is planned to exclude health insurance premiums up to ₹5 lakh for people, except elderly citizens, from GST.
Health insurance policies that cover more than ₹5 lakh would still be subject to an 18% GST.
These recommendations are anticipated to be discussed during the December 21 meeting of the GST Council in Jaisalmer.
