India’s GST Cut May Lower Health, Life Insurance Costs

The cost of insurance premiums for Indian policyholders might see a decline if the GST Council decides to reduce the Goods and Services Tax rate on health and life insurance policies, as stated by Finance Minister Nirmala Sitharaman, as per the Economic Times. The GST Council is currently in the process of evaluating this matter through a Group of Ministers (GoM) established during its 9 September meeting.

Presently, an 18% GST is levied on premiums for health and life insurance. In the 2023 – 24 fiscal year, a significant amount of ₹16,398 crore was collected in GST from these policies, with ₹8,135 crore from life insurance and ₹8,263 crore from health insurance. Additionally, ₹2,045 crore was raised from reinsurance. The GoM, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, had its initial meeting on October 19 and is anticipated to present its conclusions at the GST Council meeting scheduled for December 21 in Jaisalmer.

Sources suggest that the GoM is contemplating GST exemptions. Term life insurance and senior citizens’ health insurance premiums could potentially be exempted. There is also a proposal to waive GST on health insurance coverage of up to ₹5 lakh, while maintaining the 18% rate for policies with coverage exceeding that amount. This development holds great significance for the insurance industry and policyholders alike, as any changes could have a substantial impact on the affordability and accessibility of insurance in India.

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