The 54th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, saw participants arriving at a ‘broad consensus’ on lowering Goods and Services Tax (GST) on both health and life insurance premiums, according to a PTI report. However, modalities have to be worked upon so a final decision would be taken at the next GST Council meeting, the report said.

Currently, a GST rate of 18% is imposed health and life insurance premiums.

The Fitment Committee, comprising the Centre and state tax officials, at the meeting came out with data and analysis and showed implications of GST reduction on life, health and reinsurance premiums.

“Broad consensus has been reached on GST rate reduction on health and life insurance but modalities would be decided in the next council meeting,” PTI report quoted one of the sources as saying.

According to the report, most states were in favour of cutting GST on insurance premiums.

Also read – Tax burden, surging premiums curb spread of health insurance cover

GST collections showing an uptrend

With monthly GST collections showing an uptrend for the past several months, the government should not have any hesitation in initiating taxpayer-friendly measures, according to experts. The monthly gross GST collections have reached around Rs 1.75 lakh crore.

The lowering of GST rate on health and life insurance premiums would give a much-needed relief to crores of policyholders and a big boost to insurers.

Tax treatment of insurance premiums in the pre-GST regime

Insurance premiums in the pre-GST regime used to attract service tax. With the pan-India rollout of GST in 2017, the service tax was subsumed into GST.

In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premiums, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premiums.

The issue of GST on health and life insurance premiums was even raised in Parliament, with Opposition members seeking tax exemptions on insurance premiums. Union Transport Minister Nitin Gadkari also wrote to FM Nirmala Sitharaman, urging her to remove GST on life and medical insurance premiums.

Also, West Bengal Finance Minister Chandrima Bhattacharya raked up the insurance premium issue at the meeting of the GoM on rate rationalisation last month and the matter was then referred to the Fitment Committee for further analysis.