Centre Mulls GST Relief On Life And Health Insurance Premiums

The government is weighing a plan to make life and health insurance a little lighter on the pocket by freeing them from the 18 per cent Goods and Services Tax (GST) levy, according to a recent Times of India report. For years, policyholders have been paying the tax on premiums, a cost that often makes insurance appear expensive to the average middle-class family. If the proposal goes through, it could reduce monthly outgo by millions and possibly persuade more people to buy coverage.

The suggestion came up in discussions held by a Group of Ministers (GoM) set up under the GST Council. Bihar’s Deputy Chief Minister Samrat Choudhary, who heads the panel, said there was broad agreement among the members on doing away with the tax. The final word, however, will rest with the GST Council when it meets next.

Insurance has become a necessity in most households, with medical expenses rising at a pace that few incomes can keep up with. Families that skip health cover often face crippling bills in emergencies. Life insurance, too, remains the first line of financial security for dependents. Yet, the burden of GST has been a sticking point, especially for those buying policies with modest premiums. An exemption could make policies more affordable and push more people to opt in.

Is Everyone OK With The Proposal

Not everyone is content to stop at the announcement. Telangana’s deputy Chief Minister, Mallu Bhatti Vikramarka, welcomed the idea but cautioned that the relief should not end up padding the margins of insurers. He insisted that there must be a system in place to ensure that any cut in tax actually reflects in lower premiums for consumers.

There is, of course, a price tag attached. Removing GST from individual policies could cost the exchequer close to Rs 9,700 crore a year. It is not a small sum, but officials believe the social gains from wider insurance coverage justify the loss.

The move also sits neatly within the government’s wider plan for what is being called GST 2.0. Along with reducing the number of tax slabs, the Centre is looking to ease the burden on essential services. Insurance, given its role in household security, is one of the obvious candidates.

The GoM is expected to send in its final report by September or October. That means the GST Council could take a call before the festive season, which is traditionally a strong period for policy sales. For consumers, this could mark a rare moment when tax policy directly softens the blow of day-to-day expenses.