Is cost of health, life insurance expected to decrease? Nirmala Sitharaman replies in Lok Sabha

The cost of health and life insurance premiums may decrease if the GST Council recommends a reduction in the applicable tax rates, Union finance minister Nirmala Sitharaman informed the Lok Sabha on Monday.

Responding to a query on whether the government plans to eliminate or reduce GST on term and health insurance policies, Sitharaman said a Group of Ministers (GoM) has been constituted to holistically examine the issue.

"...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 reduction in GST," she said.

The GoM, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, was established after deliberations in the GST Council's 54th meeting in September. Its first meeting was held in October to explore the impact of GST rates on life and health insurance policies, Sitharaman said in a written reply.

"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 as the cost of insurance will reduce to that extent," the minister said.

However, Sitharaman clarified that the extent of revenue loss due to such a move cannot be projected in the absence of specific recommendations from the GoM or decisions on revised rates by the GST Council.

The GST Council, chaired by the Union finance minister and comprising her state counterparts, is slated to meet on December 21 where the GoM report on reduction of GST on life and health insurance is expected to be discussed.

Also, Rs 2,045 crore was raised as GST from re-insurance on life and health insurance last fiscal, including Rs 561 crore from reinsurance on life and Rs 1,484 crore on healthcare.