With the end of the year approaching, the GST Council may soon bring significant relief to policyholders of life and health insurance. As per recent reports, the council is set to meet in December to discuss a report from the Group of Ministers (GoM) on rationalizing GST rates on insurance premiums, potentially leading to reduced tax burdens for policyholders.
According to sources, the council's meeting is expected post-elections in Maharashtra and Jharkhand, where it will review the GoM's recommendations. The GoM, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, convened in New Delhi on October 19 to discuss the matter and has reportedly reached a consensus on specific proposals.
Key proposals by the GoM include a full GST exemption on pure-term life insurance premiums, particularly for policies covering family members. Additionally, the committee has recommended a GST exemption on health insurance policies for senior citizens, and for non-senior citizens, an exemption on policies with coverage up to ₹5 lakh.
If these measures are implemented, there would be a revenue implication of approximately ₹213 crore per annum for life insurance and ₹2,100 crore for health insurance due to the reduced GST on premiums. Currently, insurance premiums are taxed at an 18% GST rate, making this potential exemption a much-anticipated relief for policyholders.
While these proposals aim to make insurance more accessible and affordable, the final decision lies with the GST Council. If approved, these changes could offer a substantial financial reprieve for millions of citizens considering new or renewed life and health insurance policies.
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