In a significant move to boost the insurance sector, the central government is aiming at reducing the GST on health Insurance premium. However, deadlock persist on input tax credit, sources said.
The awareness for health insurance has increased after Covid and with this move, the government aims to increase penetration.
During talks with Insurance companies Government has in principle agreed to reduce GST on health insurance policies from 18% to 5% without input tax credit. But Insurance Industry insists on input tax credit. Insurance companies are continuously demanding to reduce the burden of GST in health insurance premium.
According to insurance companies, 18% GST is a big hurdle in health insurance sale.18% GST on Health Insurance policies is hampering penetration. Industry says loss due to GST cut will be compensated with increased premium and high volume. Insurance Companies claims to bring the health insurance into 12% tax bracket with Input Tax credit.
There is an 18% GST imposed on life and health insurance currentlyA high GST rate is not supportive of increasing the insurance penetration. The demand for reduction of GST on health insurance premium has been around for some time now due to the low penetration of health cover in India.
Recently, the insurance industry has approached the government to sort out the issue without burning its fingers.
While a top representative team consisting of some of the CEOs of leading private sector general insurers have already met Tarun Bajaj, retiring Revenue Secretary, Ministry of Finance (MoF), the representatives of life insurers are planning to meet Bajaj’s successor Sanjay Malhotra shortly after he takes over his new job in December.
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