Good news is on the way for those who pay health and term life insurance premiums, as the government is considering removing GST on health insurance policies with coverage up to Rs 5 lakh. This move is expected to ease the financial burden on policyholders, especially senior citizens and those opting for affordable health insurance plans. The decision was discussed in a Group of Ministers (GoM) meeting held recently, and it has gained considerable support from many state ministers.
GST Exemption for Premiums Up to Rs 5 Lakh
Currently, health and term life insurance premiums are subject to 18% GST. However, in a recent GoM meeting, it was suggested that policies with coverage up to Rs 5 lakh be exempted from GST. This could significantly benefit middle-class families and individuals who rely on these insurance policies for health protection.
The exemption is likely to apply to health insurance policies, family floater plans, and term life insurance, with special consideration for senior citizens who may receive additional benefits. The move is seen as a positive step towards reducing the financial stress on citizens while promoting wider insurance coverage across the country.
Final Decision Pending in GST Council Meeting
While the GoM has expressed support for the exemption, the final decision will be taken in the upcoming GST Council meeting. The council will review the proposal and provide formal approval before it can be implemented. Until then, the current GST rate of 18% on insurance premiums remains in effect.
Exemption for Health Insurance Up to Rs 5 Lakh
The proposed exemption specifically targets health insurance policies that offer coverage up to Rs 5 lakh. According to reports, individuals who buy policies with this coverage may be exempt from paying the 18% GST that is currently levied. This will especially benefit those who opt for affordable plans, providing some financial relief and encouraging more people to secure health insurance.
Senior citizens will also see benefits from this exemption, as they often pay higher premiums due to increased health risks. Reducing the GST on these premiums will make health insurance more affordable for the elderly, providing better financial security.
Policies Over Rs 5 Lakh Still Subject to GST
It’s important to note that while the exemption applies to policies with coverage up to Rs 5 lakh, premiums for policies exceeding this amount will still attract the 18% GST. This means that those opting for high-value health insurance plans will continue to pay GST at the current rate.
Nitin Gadkari’s Support for Reducing GST
Union Minister Nitin Gadkari has been a vocal advocate for reducing GST on health and life insurance. He had earlier written to the Finance Minister, urging the government to reconsider the 18% GST on health and life insurance premiums. Gadkari called this tax an unnecessary burden on policyholders, particularly given the uncertainties and risks associated with life and health.
The government has been reviewing these suggestions and discussing possible changes, which is why the GoM meeting was convened to address this issue.
Current GST on Insurance as a Financial Service
Since the introduction of the Goods and Services Tax (GST) in India on July 1, 2017, the insurance sector has been treated as part of the financial services industry, and hence, subject to GST. Both health insurance and term life insurance premiums are taxed at 18%. While the tax has simplified India’s tax system by replacing multiple indirect taxes, it has also added to the cost of essential services like health insurance.
Consensus in the Group of Ministers
The Group of Ministers (GoM) that discussed this issue includes representatives from 13 states, including Uttar Pradesh, Rajasthan, Karnataka, and West Bengal. The consensus among the GoM members was in favor of exempting health insurance premiums up to Rs 5 lakh from GST. This shows broad support for the move across different state governments.
The final approval from the GST Council is eagerly awaited by both policyholders and the insurance industry, as it could significantly impact insurance affordability and uptake in India.
