The GST Council could lower the rates of health and life insurance premiums at its meeting later this month if it accepts a recommendation made by a rate rationalisation committee, officials said on Thursday.
Though sources suggested the panel is headed to introduce a uniform 5 % rate on these premiums, down from an existing 18%.
But it was against scrapping the tax altogether since that would have a bearing on revenue for both the Centre and states.
In 2017, when the tax regime replaced service tax then placed GST rate at 18% on health and life insurance premiums in force. As a result, policyholders have had to pay more in premium costs than under the old 15% service tax.
The reduction in GST rate, which ticks another demand from several quarters comes after mounting pressure.
Almost 74% of the Goods and Services Tax (GST) collected as premiums goes back to states, Finance Minister Nirmala Sitharaman stated in her reply on the Finance Bill.
Firstly, 50% of the proceeds are kept for these states and 50% is deposited to Centre. Secondly, 41% of the Centre's overall collections are devolved to states to bring their share at par with around 73-74%.
Among the other recommendations made by a parliamentary committee - chaired by former minister of state for finance Jayant Sinha - is that it has suggested to GST panel rationalising GST on insurance, particularly "health and term".
It has proposed that the RBI issue 'on-tap' bonds to take care of the capital needs of the industry.
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