The Group of Ministers (GoM) on GST rate rationalisation has approved the proposal to scrap multi-slab GST (Goods and Services Tax) system and go with a two-tier structure with a majority of items under the 5% and 18% rates, GoM Convenor on GST rate rationalisation and Bihar Deputy Chief Minister Samrat Choudhary told reporters on August 21.
Prime Minister Narendra Modi in his Independence Day speech announced that the government would be coming up with a mega GST reform, terming it a Diwali gift for people in the festive season.
After the PM’s speech, the government later came out with details about the upcoming next-generation GST reform which is aimed at lowering tax rates for most daily use essential items, home appliances and automobiles, etc.
What did GoM Convenor say on GST exemptions on life and health insurance premiums?
Choudhary has said that the GoM has proposed to the GST council to completely exempt the health and life insurance premiums from the Goods and Service Tax (GST) in the revamped regime this Diwali. He told reporters that the GoM is in favour of exempting all kinds of health and life insurances from the GST.
“Everyone expressed that Life and Health Insurance (for individuals) should be exempted from GST. The GST Council will decide,” he said.
The Centre’s proposal to exempt insurance premiums from GST levy is part of the overall next-Gen GST reform. The plan is to have only two rates for most items – 5% and 18% — based on categorisation of products as merit and standard, which means 12% and 28% GST slabs would be scrapped.
Now, it is up to GST Council to take a final call on the rate rationalisation before Diwali. The GST Council is expected to hold meeting in September.
Currently, health and life insurance premium attracts 18% GST. Now it will be a big relief for insurance policy holders if the rate is brought to zero as suggested by the Group of Ministers.
In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premium, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premium.
What did experts say on rate rationalisation on insurance premiums
Deepak Kumar Jain, Founder and CEO of TaxManager.in, said, “The exemption of GST on Insurance Premiums would directly reduce premiums by 18%, making insurance more affordable, improving penetration, and giving relief to middle-class families, senior citizens, and first-time buyers — with wider benefits for financial security in India.”
This will be a win-win situation for consumers – with lower insurance premiums thereby savings costs, insurance sector – demand for insurance will be boosted.
Jude Gomes, MD & CEO Ageas Federal Life Insurance, says, “We appreciate the government’s suggestion to abolish GST on life and health insurance premiums, as this progressive step will render protection solutions much more affordable and accessible to millions of Indians.”
By abolishing the GST tax, the government has made a customer-centric move that will induce more families, particularly from middle-class and underprivileged sections, to get themselves covered with the proper insurance, Gomes added.
“This change is also part of the overall dream of ‘Insurance for All’ by 2047, driving greater penetration in urban and rural India. Affordability is a major driver, but we also think it is essential that we tackle some of the structural issues like the inverted duty structure that still affects industry efficiency and margins,” he added.