A Group of Ministers (GoM), assigned to review the Goods and Services Tax (GST) on life and health insurance premiums, is contemplating tax exemptions on certain policies. The panel is likely to recommend GST exemption for term life insurance and health insurance coverage up to ₹5 lakh for senior citizens above 60 years. However, the GoM has refrained from advocating for a complete tax waiver on all health insurance, where the current GST rate stands at 18%.
During its meeting on Saturday, the GoM discussed the financial implications of these exemptions, estimating that removing GST from term life insurance could cost the exchequer around ₹200 crore annually, while exempting senior citizens' health insurance would result in a ₹3,000 crore revenue loss. Over the past three fiscal years, health insurance premiums have contributed ₹21,000 crore in GST.
The GoM will submit its recommendations to the GST Council by October-end, which will make the final decision. Additionally, the panel also addressed the GST on around 100 products, proposing rate reductions on 20-litre packaged water bottles, bicycles, and exercise notebooks, while suggesting hikes on luxury items like wristwatches above ₹25,000 and shoes priced above ₹15,000. These rate adjustments are expected to generate an extra ₹22,000 crore in revenue, which could help offset the cost of the proposed insurance premium exemptions.
Although some members advocated reducing the GST rate on all life and health insurance premiums from 18% to 5%, the majority preferred focusing concessions on senior citizens.
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