No GST on premiums? Life and health insurance tax breaks in the works

The Goods and Services Tax (GST) Council is considering exempting premiums paid for life and health insurance from GST.

For the insurance sector, GST on term life insurance premiums are likely to be exempted for all persons, including plans that consist of family members. Health insurance premium paid by senior citizens irrespective of coverage would also be exempted. For other citizens, health insurance cover till Rs 5 lakh is likely to be exempted and the existing rate of 18 per cent will be charged for health insurance cover over Rs 5 lakh.

Key Points:

• Health Insurance Exemption: Premiums paid for health insurance with coverage of up to Rs 5 lakh for individuals other than senior citizens may be exempted from GST.
• GST on Higher Coverage: Premiums for health insurance coverage exceeding Rs 5 lakh will continue to attract an 18% GST.
• Life Insurance: GST on life insurance premiums for term policies and family floater policies is currently 18%.

The decision to exempt GST on life and health insurance premiums is still under consideration by the GST Council. If implemented, this would provide relief to policyholders and boost the insurance sector.

 

"GoM members are broadly on board for cutting my rates on insurance premiums. A final decision will be taken by the GST Council," an official was quoted as saying by PTI.

The revenue implication of the exemption proposal for senior citizens for health insurance is expected to be around Rs 2,200 crore and Rs 200 crore for exemption to term cover premiums. 

Bihar Deputy Chief Minister Samrat Chaudhary said, "Every GoM member wants to give relief to people. Special focus be on senior citizens. We will submit a report to the council. A final decision will be taken by the council".

However, there might be no GST on insurance premium paid for senior citizens, irrespective of the coverage amount.

The GST Council in its meeting last month had decided to set up a 13-member GoM to decide on tax on health and life insurance premiums.

Choudhary is the convenor of the GoM. The panel includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana.

The GoM has been mandated to submit its report to the Council by October-end.