A proposal for rationalising GST on insurance premiums has surged with the Financial Services department and the Issuance Regulatory and Development Authority of India (IRDAI) assisting the move, before the GST council meeting.
On December 21, the GST Council 55th meeting is scheduled to meet at Jaisalmer in Rajasthan and one possible item on the agenda is restructuring the GST on insurance premiums. Earlier a Group of Ministers advocated waiving the premiums filed on health insurance for senior citizens, health insurance with coverage of ₹5 lakh, and term life insurance. GoM for all other policies is recommended to retain the current rates.
There is an 18% GST on the premia for health insurance, term, and unit-linked insurance plans as of date. The applicability of the GST varies on the endowment plans. It is 4.5% for the premium filed in the first year it is 2.25% from the second year. The rate of GST is 1.8% for life insurance in the form of single-premium annuity policies. For all age groups, the rates are identical.
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The IRDAI before a Parliamentary panel cited distinct developed countries, including the European Union and Canada, exempted insurance products from VAT or GST. The same supports the claim to furnish identical benefits in India to uplift greater insurance penetration, it mentioned.
It was claimed by the insurance regulator that the surged longevity and healthcare requirements necessitate the effective adoption of health insurance. Giving GST exemption to micro-insurance and senior citizen health policies would provide an advantage to the deprived sections. The ongoing inconsistency in which the medical services are waived but premiums draw GST builds an unjust hindrance.
IRDAI to furnish relief before the disadvantageous and vulnerable sections of society has recommended providing exemptions from GST for retail health policies proposed to senior citizens, micro-insurance policies, and term insurance policies up to a sensible limit. The GST reduction proposal would indeed be supported by the financial services department.
In a written response, Minister of State in the Finance Ministry Pankaj Chaudhary On November 25, cited that the GST council in a meeting on September 9, discussed the issue of waiving/lessening the GST on life and health insurance.
It suggested directing the case to a Group of Ministers (GoM) to look into the problem. “The first meeting of the GoM was held on 19th October 2024 at New Delhi where the issues of GST rates on health and life insurance policies were discussed. The recommendations of the GoM when received will be placed before the GST Council,” Chaudhary mentioned.
GST collection was over Rs 29000 crore and through health insurance premia the same was over Rs 23,000. Via re-insurance premia under life and health insurance nearly Rs 4700 crore was collected, as per the data cited in the written answer by Minister of State in the Finance Ministry Pankaj Chaudhary.
Before that the department concerned the Standing Committee on Finance with the opinion to make the insurance cheaper, suggesting that GST rates applicable to health insurance products specifically retail policies for senior citizens and micro-insurance policies (up to specified limits under PMJAY, now Rs 5 lakh), and term policies may be decreased.
