54th GST Council Meeting: 'Broad consensus' on reducing GST rate on insurance premiums, say reports

Currently, there is an 18% GST rate on health and life insurance premiums.

The Fitment Committee, comprising the Centre and state tax officials, on Monday presented a report giving data and analysis and implications of GST reduction on life, health and reinsurance premiums.

"Broad consensus has been reached on GST rate reduction on health and life insurance but modalities would be decided in the next council meeting," PTI reported quoting one of its sources.

The 54th meeting of the GST council was chaired by Union Finance Minister Nirmala Sitharaman and comprised state ministers.

The report said most states were on board with rate reduction as the monthly GST collections are seeing an uptrend providing room for taking taxpayer-friendly measures.

If GST rates are reduced, it would be beneficial for crores of policyholders as the premium would come down.

The monthly gross GST collections have stabilised at around ₹1.75 lakh crore compared to ₹90,000 crore in the first year of Goods and Services Tax (GST), introduced on July 1, 2017.

Insurance premiums in the pre-GST regime used to attract service tax.

With the pan-India rollout of GST in 2017, the service tax was subsumed into GST.

In 2023-24, the Centre and states collected ₹8,262.94 crore through GST on health insurance premiums, while ₹1,484.36 crore was collected on account of GST on health reinsurance premiums.

The issue of taxation of insurance premiums figured in Parliament discussions with Opposition members demanding that health and life insurance premiums be exempt from the GST. Even Transport Minister Nitin Gadkari wrote to FM Sitharaman on the issue.

Sitharaman in her reply to a discussion on the Finance Bill 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 at the GST Council.

The report also added that a proposal to tax online payments above ₹2,000 was likely to be discussed in the GST Council meeting. Currently, online payments made through payment gateways are not taxed.

Last month, after the first meeting of the reconstituted Group of Ministers on GST for rate rationalisation, Samrat Chaudhary, Bihar Deputy CM and Convenor of GST GoM on rate rationalisation,  said that proposals had come for rate changes in the health insurance sector, and the group was reviewing the representations.