The Group of Ministers ( GoM ) under the Goods and Services Tax ( GST ) Council is currently considering removing GST on premiums paid for life and health insurance policies. The Group of Ministers (GoM), headed by Bihar’s Deputy Chief Minister Samrat Choudhary on October 19, 2024 discussed lowering GST rates, with most members agreeing that providing this relief is important.
The ministers discussed ways to make insurance more affordable for ordinary citizens. One of the main goals is to reduce the financial burden on people who buy health and life insurance.
Current Taxation and Proposed Changes
Life and health insurance premiums are taxed at a uniform rate of 18% under GST. Now, the GoM recommends reducing the GST rate which ultimately reduces the burden on the consumers, especially for individuals with lower health coverage and senior citizens. Under the proposal:
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Special Focus on Senior Citizens
During the meeting, it was agreed that senior citizens should receive special attention when it comes to health insurance. However, the relief being discussed would not be limited to just senior citizens but everyone. The ministers explained that although the relief might vary, everyone would see some benefit from the changes.
Other proposals
The GoM also proposed reducing GST rates on packaged water, bicycles, and exercise notebooks while raising rates on luxury goods such as high-end shoes and watches. This adjustment is expected to generate Rs. 22,000 crore in revenue to compensate for the loss from insurance premium tax cuts.
How It Could Impact You?
The proposed GST exemptions on life and health insurance could directly benefit you by making insurance more affordable. If you’re a senior citizen, the complete GST exemption on health insurance means your premiums would be lower, helping you access better healthcare without breaking the bank. For others, term life insurance and health insurance policies up to ₹5 lakh in coverage may also become cheaper, allowing you to safeguard your family’s financial future and health at a lower cost.
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If you regularly purchase essential goods like packaged water, bicycles, or exercise books, you could also see some price reductions as the government plans to lower GST on these items. This could make everyday essentials more affordable, easing your financial burden, especially if you are part of a low- or middle-income household.
On the other side, if you’re someone who buys luxury goods like high-end shoes or watches, you may see a price hike due to the proposed GST rate increases on these items. However, these changes are part of the government’s broader plan to provide relief to more essential areas of spending, ensuring that your money can go further where it matters most on healthcare, financial protection, and daily necessities.
Next Steps: Final Decision in November
The GoM, which started with six members, has now expanded to 30 members to focus on health and life insurance premiums. This larger group will submit a report by the end of October. The GST Council will then meet in November to make the final decision on whether to lower the GST on these premiums.
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This GST relief could make insurance more affordable for millions of people, helping them manage their health and financial security better. Many are hopeful that the government will take positive steps to reduce the GST on health and life insurance, which would provide much-needed financial relief for citizens across the country.
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