GST Council meeting: Decision on reducing health & life insurance premiums deferred, more clarity sought

The 55th GST Council meeting has deferred its decision on reducing the premium on health and life insurance to the next meeting, as more clarifications are needed. The Council has tasked the Group of Ministers (GoM) with providing additional information to make their report more comprehensive.

This suggests that the matter requires further analysis and detailed examination before any decisions are made on revising the GST rates or reducing premiums related to health and life insurance.

The Group of Ministers (GoM) on insurance to consider some more suggestions before forming a view. It is likely to meet in January, Deputy Chief Minister of Bihar Samrat Chaudhary said.

Currently, health insurance, term life insurance, and unit-linked insurance plans are subject to an 18 percent GST rate. Endowment plans have a different GST application, with a rate of 4.5 percent in the first year and 2.25 per cent from the second year onwards. Single premium annuity policies for life insurance carry a 1.8 percent GST rate. These rates apply uniformly across all age groups.

Gyanendra Tripathi, Partner & Leader (West), Indirect Tax, BDO India said, "If the GST rate revision on insurance premiums had been concluded in this meeting, it would have been very timely for the masses because a large number of insurance policies would have premiums due in the last quarter of the financial year, and a significant number of people would have benefited from the same. One would hope that the rate revision is finalised and implemented at the earliest, so as to help increase the insurance coverage in the country."

The Group of Ministers (GoM) on Health Insurance had presented its recommendations to revenue officials from both the state and central governments on December 16. 

Key recommendations were: 

• Exemption for pure-term life insurance: The GoM has proposed a GST exemption for pure term life insurance policies that cover family members. This would mean that these policies will not be subject to GST, reducing the financial burden on policyholders. 
• Exemption on health insurance for senior citizens: Another major recommendation is the exemption of GST on health insurance policies specifically for senior citizens, which would help make healthcare more affordable for the elderly population. 
• Reducing GST rate on individual health insurance: The GoM has also proposed reducing the GST rate on all individual health insurance policies to 5 percent, but without the option for Input Tax Credit (ITC). This would aim to lower the cost of health insurance premiums for individuals while keeping the process straightforward. 

(This is a developing story follow for more updates)