GST Council Nears Agreement on Insurance Premium Tax Cut

The GST Council is close to reaching a consensus on reducing GST rates for health and life insurance premiums. The final decision is expected to be made at the next meeting. The Fitment Committee has presented data and analysis on the implications of this rate cut. This measure could benefit millions of policyholders.

The GST Council has made significant progress towards reaching a consensus on reducing GST for health and life insurance premiums from the current 18 percent. A final decision will be taken in the next meeting, insiders revealed.

The Fitment Committee, which includes both central and state tax officials, provided a report on Monday that includes data analysis and potential consequences of reduced GST rates on life, health, and reinsurance premiums.

'A broad consensus has been reached on reducing the GST rate for health and life insurance, but specific modalities will be ironed out in the next council meeting,' according to one source.

The ongoing 54th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and state ministers, is making strides. Sources indicated that most states support the rate reduction, given the upward trend in monthly GST collections, allowing for taxpayer-friendly policies.

If the GST rates are reduced, millions of policyholders could see reduced premiums, a positive outcome for many.

The monthly gross GST collections have stabilized around Rs 1.75 lakh crore, significantly higher than the Rs 90,000 crore noted during the first year of GST implementation in July 2017. Before GST, insurance premiums were subject to a service tax.

Since the 2017 GST rollout, service tax was replaced by GST. In the fiscal year 2023-24, the Centre and states collected Rs 8,262.94 crore from GST on health insurance premiums, and Rs 1,484.36 crore from GST on health reinsurance premiums.

This issue has also been discussed in Parliament, with Opposition members advocating for the exemption of health and life insurance premiums from GST. Transport Minister Nitin Gadkari had also addressed the matter to Sitharaman.

Responding to a debate on the Finance Bill, Sitharaman noted that 75 percent of GST revenue goes to states and urged Opposition members to press their state finance ministers to address the issue within the GST Council.

West Bengal Finance Minister Chandrima Bhattacharya recently raised the insurance premium issue in a GoM meeting focusing on rate rationalization, which subsequently referred the matter to the Fitment Committee for further examination.

(With inputs from agencies.)