During its 54th meeting on September 9, the GST Council formed a 13-member Group of Ministers (GoM) to review the tax rates on health and life insurance premiums. Bihar Deputy Chief Minister Samrat Choudhary will serve as the convenor of this GoM, with representatives from 12 states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala.
Review of Current Insurance GST
The GoM is tasked with examining the current 18% GST on insurance premiums, including both health and life insurance products. The review will encompass individual and group policies, as well as family floater medical insurance. The GoM will also look into special categories like senior citizens and persons with mental illness. Their recommendations are expected to be submitted by October 30, 2024, with the GST Council set to make a final decision during its next meeting in November.
Opposition to Current Tax Rates
Some opposition-ruled states, such as West Bengal, have called for a complete exemption of GST on health and life insurance premiums. Others support lowering the tax rate to 5%. Prominent voices, including Transport Minister Nitin Gadkari, have criticized the current insurance premium tax, arguing that it essentially taxes life’s uncertainties.
Significant GST Revenue from Insurance
In the fiscal year 2023-24, the Centre and states collectively earned Rs 8,262.94 crore from GST on health insurance premiums and Rs 1,484.36 crore from health reinsurance premiums. Responding to opposition in the Lok Sabha, Finance Minister Nirmala Sitharaman clarified that 75% of GST revenue on insurance premiums goes to states and encouraged state finance ministers to present their concerns at the GST Council.
