GST Council Meeting 2024: The GST Council on Sunday constituted a 13-member Group of Ministers (GoM) to suggest GST rates on premiums of various health and life insurance products and submit its report by October 30.
The 54th GST Council meeting on September 9 decided to set up a GoM to examine and review the present tax structure of Goods and Services Tax (GST) on life and medical insurance. A final call by the Council on the taxation of insurance premiums is likely to be taken in the next meeting in November based on the GoM report.
Currently, 18% of GST is levied on insurance premiums.
Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the GoM.
The members of the panel include members from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu and Telangana.
The Terms of Reference (ToR) of the panel also include suggesting tax rate of health/medical insurance including individual, group, family floater and other medical insurance for various categories like senior citizens, middle class, and persons with mental illness.
Also, the panel will suggest tax rates on life insurance, including term insurance, life insurance with investment plans whether individual or group and re-insurance.
“The GoM is to submit its report by October 30,” 2024,” said the Office Memorandum issued by the GST Council Secretariat on the Constitution of GoM on Life and Health insurance.
Some opposition-ruled states, including West Bengal, had demanded complete exemption of GST on health and life insurance premiums, while some other states were in favour of lowering the tax to 5%.
Even Transport Minister Nitin Gadkari had written to Finance Miniter Nirmala Sitharaman in July, saying “levying GST on life insurance premium amounts to levying tax on the uncertainties of life.”
In 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 on account of GST on health reinsurance premiums.
Sitharaman in her reply to a discussion on the Finance Bill in the Lok Sabha in August had said that 75% of the GST collected goes to states and the Opposition members should ask their state finance ministers to bring the proposal to the GST Council.
Reduction of GST rates on Life and medical insurance
Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co., said, “Despite being the world’s most populous country, India ranks among the lowest in terms of life and medical insurance coverage per capita. Also, the percentage of the Indian population with insurance coverage is substantially lower than that of many developed nations like the United Kingdom and the United States.”
Is Complete Exemption Possible?
Karnani added that while a complete exemption of GST on insurance premiums might lead to challenges for the insurance industry due to potential ITC reversals under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017, the industry is hopeful for a significant reduction.”
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