GST Panel to Review Tax on Health & Life Insurance Premiums

Based on the GoM’s report, the Council is expected to make a final decision on the taxation of insurance premiums during its next meeting in November.

A ministerial panel formed to review and potentially lower the Goods and Services Tax (GST) on health and life insurance premiums will convene its first meeting on October 19.

Currently, insurance premiums are subject to an 18% GST, sparking demands for either a reduction or complete exemption from the tax.

The GST Council, during its last meeting earlier this month, established a 13-member Group of Ministers (GoM) to deliberate on the tax rate for insurance premiums.

Bihar Deputy Chief Minister Samrat Choudhary has been appointed as the convenor of the GoM. The panel includes ministers from several states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, and Goa.

The GoM is tasked with reviewing the GST rates on both health and life insurance premiums. Its findings and recommendations must be submitted to the GST Council by the end of October.

Based on the GoM’s report, the Council is expected to make a final decision on the taxation of insurance premiums during its next meeting in November.

An official source stated, "The GoM on GST on insurance will meet on October 19 in Delhi."

The panel will discuss tax rates for various categories of insurance, including individual, group, family floater, and senior citizen health/medical insurance, as well as coverage for persons with mental illness.

Debate Over GST Exemption or Reduction

The discussion on GST for insurance premiums has sparked varying opinions among states.

Opposition-ruled states such as West Bengal have called for a complete exemption of GST on health and life insurance premiums. Others, however, are in favor of lowering the GST rate to 5%.

Union Transport Minister Nitin Gadkari also voiced concerns, writing to Finance Minister Nirmala Sitharaman in July, arguing that "levying GST on life insurance premium amounts to levying tax on the uncertainties of life."

Revenue from GST on Insurance

In the 2023-24 fiscal year, the Center and states collected a substantial INR 8,262.94 Cr through GST on health insurance premiums and an additional INR 1,484.36 Cr from GST on health reinsurance premiums.

In a response to the debate on the Finance Bill in the Lok Sabha in August, Finance Minister Nirmala Sitharaman emphasized that 75% of GST collections go to the states.

She suggested that Opposition members should urge their state finance ministers to bring the proposal for tax exemptions or reductions to the GST Council for discussion.

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