Agreement is being reached on removing the 18% GST levied on life and health insurance. Almost all states have supported this proposal in the meetings of the Group of Ministers (GoM). Following council approval, customers will receive direct relief on insurance premiums, and insurance plans will become more affordable.
GST News: Bihar Deputy Chief Minister and convener of the Group of Ministers (GoM), Samrat Choudhary, stated that a consensus has been reached among states regarding GST exemption on life and health insurance. Currently, these are subject to 18% GST, but the central government has proposed its complete removal. The meeting also discussed ensuring that the benefit of the tax exemption directly reaches policyholders and that premiums do not become more expensive. The GoM will submit its report to the GST Council, whose approval will prove to be a major relief for the general public.
Currently 18 percent GST
Currently, a Goods and Services Tax (GST) of 18 percent is levied on life and health insurance. Insurance companies recover this tax from policyholders, which increases the premium amount. The central government has suggested that insurance be completely exempted from GST. This step will eliminate the tax on premiums, and insurance plans will become more affordable for the common person.
Consensus reached in GoM meetings
Samrat Choudhary, the convener of the Group of Ministers formed on life and health insurance and the Deputy Chief Minister of Bihar, has said that consensus is being built on this proposal. According to sources, in several rounds of group meetings, states have unanimously stated that there should be no tax burden on essential services such as insurance.
The meeting also expressed concern that the benefit of the tax exemption should directly reach the customers. It will also be ensured that the change in rates does not adversely affect policyholders.
Report to be submitted to the Council
The Group of Ministers will soon submit its report to the GST Council. A final decision on this may be taken in the next meeting of the Council. If approved, the tax on life and health insurance will be completely removed. As soon as this decision is implemented, customers paying premiums will benefit directly.
How will customers benefit?
With the elimination of tax on insurance premiums, customers will save a significant amount on their premium amount every year. For example, if a person currently has to pay a premium of ₹20,000, they have to pay an additional 18 percent tax, i.e., ₹3,600. With the removal of the tax, the customer will only have to pay ₹20,000. This savings will directly go into the customers' pockets.
Social security to be promoted
Although all states are in favor of this proposal, some states have expressed concern that the tax exemption may affect revenue. Since the insurance sector is growing rapidly, removing the tax may reduce GST collection for the states. Despite this, the majority believes that this step is in the interest of a large section of society.
The central government believes that making insurance services tax-free will be a major step towards strengthening social security. The government wants more and more people to join health and life insurance so that they can get financial help in emergency situations.
Who are the ministers included in the GoM?
The Group of Ministers constituted for structural reforms in GST rates is currently working on several important subjects. The convener of this group is Bihar Deputy Chief Minister Samrat Choudhary. Apart from him, Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, and Kerala Finance Minister K. N. Balagopal are members.
Potential impact on the insurance sector
Experts say that the GST exemption will have a positive impact on the insurance sector. Currently, the scope of life and health insurance is increasing rapidly in India, but a large population is still away from insurance. With the removal of the tax, the premium will become cheaper, and more people will be able to join insurance schemes. This will increase the customer base of insurance companies and also strengthen people's financial security.
