The decision to form the GoM was partly influenced by demands from opposition-ruled states, such as West Bengal, which advocated for a complete exemption of GST on life and health insurance premiums. Several other states suggested lowering the GST rate to 5%.
The 54th GST Council meeting, held on September 9, 2024, led to the formation of a 13-member Group of Ministers (GoM) tasked with reviewing GST rates on health and life insurance premiums. The GoM, convened by Bihar Deputy Chief Minister Samrat Choudhary, includes representatives from states such as Uttar Pradesh, West Bengal, Karnataka, Kerala, and others. The committee is expected to submit its findings by October 30, 2024, and a final decision on revising insurance tax rates will likely be made during the Council’s next meeting in November.
Focus on Health and Life Insurance GST Rates
Currently, an 18% Goods and Services Tax (GST) is levied on insurance premiums. The newly established GoM is set to analyse this tax structure and recommend potential changes to the GST rates for various insurance products. This review will encompass both health and life insurance categories, including individual and group policies, term life insurance, and life insurance with investment components.
Terms of Reference for the GoM
The Terms of Reference (ToR) for the GoM include evaluating GST rates for different types of health insurance, such as individual, group, and family floater plans. Special categories like senior citizens, middle-class families, and individuals with mental illnesses will also be considered. Additionally, the GoM will examine tax rates on term life insurance, group life insurance, and re-insurance policies.
Differing Opinions on GST Exemption and Reduction
The decision to form the GoM was partly influenced by demands from opposition-ruled states, such as West Bengal, which advocated for a complete exemption of GST on life and health insurance premiums. In contrast, several other states suggested lowering the GST rate to 5%. Transport Minister Nitin Gadkari had also expressed concerns, stating that taxing life insurance premiums essentially amounts to taxing life’s uncertainties.
GST Collection on Insurance Premiums
In the fiscal year 2023-24, the Centre and states collected ₹8,262.94 crore through GST on health insurance premiums, along with an additional ₹1,484.36 crore on health reinsurance premiums. Addressing the concerns in Parliament, Finance Minister Nirmala Sitharaman noted that 75% of the GST collected is distributed to states, encouraging Opposition leaders to present their proposals at the GST Council level.
Final Report Due by October 30
The GoM is required to present its report by October 30, 2024. The GST Council will likely make its final decision on the matter during the November meeting, after evaluating the GoM’s recommendations on tax adjustments for health and life insurance premiums.
This upcoming decision could potentially bring significant relief to policyholders across the country, making insurance products more accessible to the masses.
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