GST Council likely to take up insurance tax relief at next meet amid revenue concerns: Report

Goods and Services Tax (GST) Council is expected to take up the long-pending issue of tax relief for life and health insurance premiums at its upcoming meeting, reported Moneycontrol on Monday, citing people familiar with the development.

The GoM has also proposed exempting GST on health insurance policies with coverage up to ₹5 lakh.

Currently, life and health insurance policies attract an 18% GST rate.

The GoM, in its November 2024 meeting, agreed to exempt GST on premiums for term life insurance and health insurance for senior citizens, as well as health insurance premiums for policies up to ₹5 lakh for other individuals.

Under the current system, insurers offset taxes paid on inputs like IT infrastructure, marketing, and administrative costs against GST collected from policyholders. An exemption would eliminate this ITC mechanism, potentially forcing insurers to absorb costs and raise premiums.

Chaudhary had then said that one more GoM meeting was needed to finalise taxation for group, individual, and senior citizens' policies.

Government estimates suggest the proposed exemptions could result in an annual revenue loss of approximately ₹2,600 crore, including ₹200 crore from term life cover and ₹2,400 crore from health insurance premium exemptions.

However, according to the Moneycontrol report, the expected gain in pan-India coverage is likely to offset the fiscal impact.