GST Council considers lowering insurance premiums; proposal sent to GoM for detailed discussion

In the 54th meeting of the GST Council held on Monday, there was a broad consensus on the necessity to reduce the Goods and Services Tax (GST) rate for health and life insurance premiums from the current 18%. However, the specific proposal has been referred to the Group of Ministers (GoM) for further deliberation, according to sources.

The GoM on rate rationalization, along with ministers from various states, will meet in Goa on September 23 to discuss the proposal in more detail. The next GST Council meeting is scheduled for November. A source mentioned, “There was a broad consensus for GST on health and life insurance premiums to be reduced, but the modalities will be decided in the next Council meeting.”

The existing GoM on rate rationalization, which now includes more states, will delve deeper into the issue. The fitment committee, comprising officials from both states and the Centre, presented detailed numbers on the proposal to reduce GST on these insurance premiums during the Council meeting. The meeting, chaired by Union Finance Minister Nirmala Sitharaman, is still ongoing.

In August, the reconstituted GoM on rate rationalization under the GST regime had its first meeting, where it broadly agreed not to alter the existing slabs in the indirect tax regime. State finance ministers raised the issue of reducing GST on health and life insurance premiums, which is being reviewed by the fitment committee.

On August 27, Sitharaman stated that both the rationalization of rates and tweaking of slabs under GST are under discussion. The discussions will proceed item-by-item, comparing current rates with the revenue-neutral rate.

In the fiscal year 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premiums, while Rs 1,484.36 crore was collected from GST on health reinsurance premiums.

Opposition leaders, including Rahul Gandhi and Mamata Banerjee, have demanded the withdrawal of GST on life and health insurance premiums. Banerjee wrote to Finance Minister Sitharaman for a rollback of GST on these premiums. Earlier, on July 28, Union Minister Nitin Gadkari also wrote to Sitharaman, stating that GST on life and medical insurance premiums amounts to taxing the “uncertainties of life.” Sitharaman responded that tax was levied on insurance premiums even before GST was imposed and that GST revenues are shared between states and the Centre.