GST Council Meeting: Will tax rates on health and life insurance premiums drop today?

GST Council Meeting begins: One of the key items on the agenda is the proposal to reduce the Goods and Services Tax (GST) on insurance premiums, a move that could bring relief to policyholders.

In Short

• GST Council may lower tax rates for health and life premiums
• Senior citizens’ health insurance premiums could be exempt from GST
• Health insurance premiums up to Rs 5 lakh may be exempt

The 55th GST Council meeting is expected to make significant decisions on tax rates for life and health insurance premiums. One of the key items on the agenda is the proposal to reduce the Goods and Services Tax (GST) on insurance premiums, a move that could bring relief to policyholders.

A Group of Ministers (GoM) set up by the Council, led by Bihar Deputy Chief Minister Samrat Chaudhary, has already made progress on this matter. In its meeting last month, the GoM recommended exempting term life insurance premiums from GST, a proposal that has garnered support from several states.

Additionally, the GoM has suggested that premiums paid by senior citizens for health insurance should be exempt from the tax, which could benefit a significant portion of the population.

There is also a proposal to exempt GST on health insurance premiums of up to Rs 5 lakh, paid by individuals who are not senior citizens. This move, if approved, would make health insurance more affordable for a broader section of the population, especially as medical costs continue to rise.

WHAT ELSE IS ON THE AGENDA?

While these changes seem to have strong backing, the Council may defer decisions on other major tax reforms, such as a higher tax on so-called sin goods like tobacco and alcohol. States are still divided on the proposal to increase taxes on these products, and a final decision may take more time.

The upcoming decision on insurance premiums is significant not only for policyholders but also for the broader insurance sector. A lower tax burden could encourage more people to opt for insurance, increasing the penetration of life and health coverage in India.

As the GST Council continues to evaluate various options, the focus on insurance premiums reflects the government’s ongoing efforts to make essential services more affordable, especially for vulnerable groups like senior citizens. With most states in favor of tax reductions, a positive outcome for policyholders seems likely.