New India Assurance, SBI Life: Insurance firms' shares gain as Centre plans to exempt 18% GST on premiums

Shares of insurance companies gained on Thursday, August 21, the government proposed exempting life and health insurance policies for individuals from GST.

Currently, health and life insurance premiums attract 18% GST. The 13-member state Group of Ministers on insurance held a meeting on Wednesday.

Almost all states were in favour of the proposal, but they asked the GST Council to devise a mechanism by which the GST rate cut benefits are passed on to the customer, said Telangana Deputy Chief Minister Mallu Bhatti Vikramarka, a member of the GoM.

About ₹9,700 crore in annual revenue loss is estimated on account of GST exemption for individual insurance policies, he said.

The GoM will submit its report to the GST Council. The report will also include views and concerns expressed by some state finance ministers.

"The Centre's proposal is clear that individual insurance policies should be exempt from GST. This has been discussed, and the GoM report will be presented to the Council,” Choudhary said after the meeting of the GoM.

"All members have given their approval for lowering rates. Some states have given their own views," he said, adding a final call on rates will be taken by the Council.

The Centre's proposal on insurance is part of the overall next-gen GST reform proposal under which goods and services tax will be levied at 2 rates—5 and 18%—based on categorisation of products as merit and standard.

The GoM on health and life insurance was set up in September to suggest tax rates.

The panel, which includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu and Telangana, has been mandated to submit its report to the GST Council by the end of October.

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.

Commenting on the development, Reliance General Insurance CEO Rakesh Jain said, “We welcome the government’s proposal to exempt health insurance premiums from GST. This will bring significant relief to policyholders and make protection solutions more affordable for millions of Indians. Removing the 18% tax burden will directly benefit middle-class households, senior citizens, and vulnerable sections of society who often view premiums as a financial strain.”

Shares of health insurance firms were the major contributors in the early session on Thursday. SBI Life Insurance (1.48%) was among the biggest gainers on the NIFTY50 index. New India Assurance shares jumped 6.23% at the time of writing the piece.

Shares of Go Digit (1.98%) and Star Health and Allied Insurance (1.31%) also traded higher.

Further, LIC (0.73%), ICICI Lombard (0.64%), Max Financial Services (0.60%) and HDFC Life Insurance (0.37%) also gained.