Finance Minister Nirmala Sitharaman said on Monday that if the GST Council proposes lowering the GST rate on health and life insurance policies, the cost of insurance for policyholders is projected to decrease. In a written reply to the Lok Sabha, she stated that at its September 9 meeting, the GST Council suggested forming a Group of Ministers (GoM) to look into the concerns surrounding GST on life insurance and health insurance.
"The topic of reviewing GST rates on life and health insurance is pending before the GoM. If the GST Council recommends a drop in the GST rate, the cost of insurance to the policyholder is projected to decrease as a result of the GST reduction," she said.
Sitharaman remarked this in response to a question about whether the GST decrease on health insurance will be a step toward making healthcare more equal.
In response to a question about how the government will ensure that insurance companies pass on the advantages of any GST decrease to customers rather than retaining them through higher premiums, Sitharaman stated that competitive pricing would reduce insurance costs.
"As the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly especially in a competitive market with many insurers as the cost of insurance will reduce to that extent," according to her.
The GST Council, chaired by Sitharaman and made up of her state equivalents, is scheduled to meet on December 21 to review the GoM report on the decrease of GST on life and health insurance.
In the fiscal year 2023-24, the Centre and state governments earned Rs 16,398 crore GST from healthcare and life insurance plans. This totaled Rs 8,135 crore from life insurance and Rs 8,263 crore from health insurance.
Last fiscal year, Rs 2,045 crore in GST was collected from reinsurance on life and health insurance, including Rs 561 crore from life insurance and Rs 1,484 crore from healthcare. The GST Council is scheduled to convene on December 21 in Jaisalmer, where it is anticipated to address the issue of GST on life and health insurance.
The inaugural meeting of the GoM on life and health insurance under Bihar Deputy Chief Minister Samrat Chaudhary was conducted on October 19th. According to sources, the GoM has broadly agreed to exempt term life insurance premiums and senior citizens' health insurance from GST.
Additionally, GST on premiums paid by anyone other than senior citizens for health insurance coverage of up to Rs 5 lakh is proposed to be exempted. However, an 18% GST would continue to apply to premiums paid for policies having health insurance coverage of more than Rs 5 lakh.
