GST on Insurance Premiums May Come Down
During the 54th GST Council meeting, presided over by the Union Finance Minister, Smt. Nirmala Sitharaman, the participants mostly agreed to slash the GST rates on health and life insurance premiums. However, the final decision will be made at the next council meeting after the modalities concerning the issue have been worked out. At the moment, insurance premiums are subjected to an 18% GST.
The support States for rate reduction
The majority of the states claimed to support the reduction of the GST on insurance premiums. The Fitment Committee constituted of the Centre and state governments’ officials submitted the data and evaluation report of the reduction on health, life, and reinsurance premiums. With the consistent increase in the GST collections which is almost at Rs 1. 75 lakh crore monthly — experts feel that the government is in a good place to implement measures that are taxpayer-friendly.
Effects of GST Cut on Policyholders and Insurers
The reduction of the GST rate would be a plus for millions of policyholders since it would mean that they would have to pay less for insurance. It would also be useful to the insurance industry, helping to reduce policy prices and thus increasing insurance density in India.
Historical Context and Parliamentary Discussions
Before the implementation of the GST in 2017, the insurance premium was charged with the service tax. This was replaced by the combined GST system which produced a lot of revenues. During the fiscal year 2023-24, the Centre and states received more than Rs 8,200 crore from health insurance premiums and Rs 1,400 crore from health reinsurance premiums.
