GST rate on insurance: The 55th GST Council meeting, set to take place soon, will examine and review the current Goods and Services Tax (GST) structure on life and medical insurance. The Group of Ministers (GoM) on Health Insurance presented its recommendations to revenue officials from both the state and central governments on December 16. The report will be reviewed by the GST Council during its meeting in Jaisalmer.
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Key recommendations:
- Exemption for pure-term life insurance: The GoM has proposed a GST exemption for pure term life insurance policies that cover family members. This would mean that these policies will not be subject to GST, reducing the financial burden on policyholders.
- Exemption on health insurance for senior citizens: Another major recommendation is the exemption of GST on health insurance policies specifically for senior citizens, which would help make healthcare more affordable for the elderly population.
- Reducing GST rate on individual health insurance: The GoM has also proposed reducing the GST rate on all individual health insurance policies to 5 percent, but without the option for Input Tax Credit (ITC). This would aim to lower the cost of health insurance premiums for individuals while keeping the process straightforward.
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These proposals, if adopted, could significantly impact the structure of the GST on life and health insurance, potentially reducing premiums and increasing accessibility to insurance products for more people.
At present, an 18 percent GST on insurance premium is charged. Sources indicated that the Council is likely to okay a proposal to exempt health and life insurance policies up to Rs 5 lakh from GST. The objective is to lower the taxation burden on lower and middle income groups. It is also likely to provide similar exemptions for policies for senior citizens.
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The GST Council, headed by Union Finance Minister Nirmala Sitharaman, and members from all states and union territories, is scheduled to meet in Jaisalmer on December 21.
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