No Relief To Middle-Class! Proposal To Rejig GST On Insurance Deferred

The insurance industry had keenly anticipated a Goods and Services Tax (GST) rate revision on premiums set for health and life insurance policies. However, the 55th GST Council meeting, which gathered today under the chairmanship of Finance Minister Nirmala Sitharaman, has reportedly deferred the rejig of GST on insurance premiums.

The 55th GST Council meeting convened in Jaisalmer, Rajasthan, and was attended by ministers from 28 states, 2 Union Territories, and tax officials in attendance, including Chief and Deputy Chief Ministers from five states.

According to some media reports, the GST reduction on the insurance matter was deferred for further examination as there was no consensus during the Group of Ministers (GoM) Meeting.

Relief on health and life insurance premiums was one of the most significant and long-anticipated demands which garnered support from both the insurance industry as well as political leaders.

Over the last few months, the appeal for this change got support from leaders such as Nitin Gadkari and Mamata Banerjee who called for an exemption in the health and life insurance premiums, especially for the benefit of senior citizens.

The Insurance Regulatory and Development Authority of India (Irdai) and the Financial Services Department have also supported this proposal to make insurance more accessible for vulnerable groups such as senior citizens and low-income families. In a submission to a Parliamentary panel, Irdai had noted that several developed nations such as Canada and many European countries have exempted insurance products from VAT (value-added tax) or GST.

The insurance regulator stated that India could benefit from rolling out a similar tax approach to insurance sector which would help with insurance penetration among different income groups and across remote areas of the country.

Currently, the GST on life and health insurance premiums is 18 per cent. It was expected to be reduced to five per cent. This would have meant a lower premium for policyholders.

Among key agendas, this proposal called for an exemption for senior citizens’ health insurance and term life insurance premium policies.

It is being said that the matter will be taken up in the next GST council meeting.