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GST Council eyes big win for health insurance: Premiums may soon be tax-free

GST Council eyes big win for health insurance: Premiums may soon be tax-free

The 55th GST Council meeting is scheduled for the last week of December in Rajasthan, marking the first meeting outside New Delhi since June 2022, which took place in Chandigarh.

Karishma Asoodani
Karishma Asoodani
  • Updated Nov 7, 2024 8:22 AM IST
GST Council eyes big win for health insurance: Premiums may soon be tax-freeGST Council might make health insurance premiums tax-free

The proposal to do away with Goods and Services Tax (GST) on health insurance premiums is expected to be a key focus at the upcoming 55th GST Council meeting, according to senior government sources speaking with Business Today TV.

The Group of Ministers (GoM) on Life & Health Insurance, which met in mid-October, recommended a GST exemption for pure term life insurance covering family members and individuals. Additionally, the panel proposed a tax exemption on all health insurance policies for senior citizens.

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Next week, the fitment committee — comprising state and central tax officials — will convene to assess the specific revenue implications of the GoM’s recommendations.

"There may be minor adjustments to health insurance premiums for non-senior citizens and investment based insurance schemes," an official shared.

As per official data, in the 2022-23 fiscal year, total health insurance premiums were around Rs 90,032 crore, with individual health insurance premiums contributing Rs 35,300 crore. The 18 per cent GST rate currently generates Rs 6,354 crore from these individual premiums.

The fitment committee in its last meeting reviewed several options, before the GoM was tasked to study the matter : 

  • Exempting all individual health insurance premiums, which would lead to a revenue loss of Rs 3,495 crore.
  • Exempting premiums for senior citizens and those with coverage up to Rs 5 lakhs, resulting in a Rs 2,110 crore loss.
  • Exempting premiums only for senior citizens, leading to a Rs 645 crore loss.
  • Reducing the GST rate to 5 per cent (without ITC) for all individual health insurance services, at a revenue loss of Rs 1,730 crore.

The committee, however, refrained from making a final recommendation, highlighting that the GST Council should weigh the financial and social impacts and hence, the GoM on Insurance Premiums was tasked with this comprehensive evaluation.

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The 55th GST Council meeting is scheduled for the last week of December in Rajasthan, marking the first meeting outside New Delhi since June 2022, which took place in Chandigarh. Alongside the insurance premiums decision, the Council will also review the GoM's Rate Rationalisation report and the fitment committee's forthcoming recommendations.

Published on: Nov 7, 2024 8:21 AM IST
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