The Centre has proposed to exempt individual life and health insurance policies from GST. Currently, insurance premiums attract 18% GST, making policies costlier for individuals.
Bihar Deputy Chief Minister Samrat Choudhary, who also convenes the Group of Ministers (GoM) on insurance, confirmed the development on Wednesday. "The Centre's proposal is clear that individual insurance policies should be exempt from GST. This has been discussed and the GoM report will be presented to the Council," he told reporters after the meeting.
The GoM, formed in September, is finalizing its report for submission to the GST Council, which will take the final call. The panel includes finance ministers from 12 states, including Uttar Pradesh, Rajasthan, Karnataka, Kerala, Gujarat, West Bengal and Tamil Nadu. Choudhary added that while some states expressed individual views, all members supported lowering GST rates on insurance.
The proposal forms part of the Centre's next-generation GST reform plan, which seeks to streamline the tax system by moving to just two slabs - 5% for essential goods and services and 18% for standard categories.
According to official data, GST collections on health insurance premiums amounted to Rs 8,262.94 crore in FY 2023-24, while Rs 1,484.36 crore was collected on health reinsurance premiums.
Industry experts believe the move, if approved by the Council, could make insurance more affordable for individuals and significantly boost insurance penetration in India, aligning with the government's financial inclusion goals.
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