GST Likely to be Exempt on Life Insurance Premiums for Senior Citizens

The Group of Ministers (GoM) set up to review GST rates on life and health insurance met on Saturday to discuss the proposal, which could bring much-needed relief to policyholders, especially senior citizens. 

The Goods and Services Tax (GST) on term life insurance premiums and health coverage for senior citizens is likely to be exempted, according to official sources. 

The Group of Ministers (GoM) set up to review GST rates on life and health insurance met recently to discuss the proposal, which could bring much-needed relief to policyholders, especially senior citizens. 

Focus on Senior Citizens' Health Coverage

The GoM, led by Bihar Deputy Chief Minister Samrat Chaudhary, discussed the potential tax exemption for health coverage premiums paid by senior citizens. Currently, health insurance premiums for policies over INR 5 Lakh attract an 18% GST. 

The exemption would apply to premiums on policies up to INR 5 Lakh. Chaudhary emphasized that the GoM aimed to "provide relief to people, with a special focus on senior citizens." 

He added that a report would be submitted to the GST Council for final approval, and the decision is expected soon.

Officials confirmed that health insurance policies exceeding INR 5 Lakh in coverage would still be subject to the 18% GST. In contrast, policies below that threshold, especially for senior citizens, might see complete relief from this tax.

Current GST on Insurance Premiums

At present, term life insurance and family floater health policies are subject to an 18% GST, a rate the GoM is considering reducing. 

"GoM members are broadly on board for cutting rates on insurance premiums. The GST Council will take a final decision," said an official involved in the discussions. This move is a step toward making health and life insurance more affordable for the general population.

However, the exemption will likely apply primarily to senior citizens' health insurance policies. If approved by the GST Council, the measure would benefit individuals who often face higher insurance premiums due to age and health conditions. 

The exemption could ease the financial burden on seniors seeking health coverage, especially for essential medical treatments.

Key Recommendations Await Final Council Decision

During its meeting last month, the GST Council established the GoM to examine tax rates on health and life insurance premiums. 

The GoM includes ministers from 13 states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana, with Chaudhary serving as the convenor.

The group has been tasked with submitting its report by the end of October. 

The council is expected to take a final call on the recommendations soon after. "Every GoM member wants to give relief to people. We will submit a report to the council, and they will take the final decision," said Chaudhary. 

While the exemption is widely supported, the exact terms are still under consideration.

Senior citizens benefit the most from the proposed changes, as their health premiums would likely be exempted from GST regardless of the coverage amount. 

This change could significantly impact their access to health care, making it more affordable for older individuals to secure comprehensive health insurance.

Once ratified by the council, the GoM's recommendations could alter the landscape of health insurance, potentially influencing future premium structures and coverage plans offered by insurers.