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GST rates on insurance: Group of Ministers submits report, Council to consider proposals
Among the recommendations are GST exemption for pure term life insurance policies that cover family members, exemption on health insurance for senior citizens beside lowering the GST rate on all individual health insurance policies to 5 per cent
A Group of Ministers under the convenorship of Deputy Chief Minister of Bihar, Samrat Chaudhary, has submitted a report regarding GST rates on insurance premium, a senior government official said here on Wednesday. Its recommendations are expected to be discussed in the GST Council meeting scheduled to take place on Saturday, December 21.
Although the recommendations of the GoM have not been made public, it is believed that these include a GST exemption for pure term life insurance policies that cover family members, exemption on health insurance for senior citizens, beside lowering the GST rate on all individual health insurance policies to 5 per cent, but without the option for Input Tax Credit (ITC). Also, no change has been suggested on all remaining insurance products, including ULIP.
On December 2, in a written reply in the Lok Sabha, Finance Minister Nirmala Sitharaman said as the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly, especially in a competitive market with many insurers. “The matter of review of GST rates on life and health insurance is pending before the GoM. If a recommendation for a reduction in GST rate is made by the GST Council, the cost of insurance to the policy holder is expected to come down on account of a reduction in GST,” she had said.
As on date, the premia for health insurance, term and unit-linked insurance plans attracts 18 per cent GST. On endowment plans, the GST is applied differently. While it is 4.5 per cent for premium paid during the first year, it is 2.25 per cent from the second year. For life insurance in the form of single premium annuity policies, the GST rate is 1.8 per cent. Rates are the same for all age groups
Earlier, a proposal for rationalising GST on insurance premium got a boost with the Financial Services Department and the Insurance Regulatory and Development Authority of India (IRDAI) supporting the move.
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