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The 18 per cent GST on life and health insurance premiums and the reduction in this rate are likely to be discussed in the GST Council meeting to be held on 9 September.
This idea is being considered as the high rate of GST has been widely criticized so that policyholders can get relief from the high GST they pay on insurance premiums. The Goods and Services Tax (GST) rate setting body may suggest a reduction in the GST rate imposed on health and life insurance with annual premiums up to Rs 50,000 with the aim of reducing costs for low and middle income groups. At present, 18 per cent GST is levied on insurance premiums. Therefore, opposition parties are opposing this rate and saying that this rate is too high. The insurance industry wants insurance policies to be kept out of the purview of GST or a lower rate of five per cent should be imposed on them. There is talk that the Fitment Committee may also set a limit on this rate, so that a combined low collection of GST, premium and sum insured can be ensured. Also, it was said that the Fitment Committee is not considering a blanket exemption from GST on life and health insurance premiums.
With this decision, a detailed report on the impact on revenue under different rate ratios of insurance policies is likely to be submitted to the GST Council. It is worth noting that the GST Council meeting is scheduled to be held on September 9. Amid the exercise to reduce the GST levy on insurance policy premiums, the Fitment Committee, which sets GST rates, believes that the rate on insurance premiums up to a maximum of Rs 50,000 should be limited or fixed, or both. So that more and more people with low or middle income can be included in the insurance cover. Also, in cases where the premium is very high, there is no need to reduce the GST rate. Of course, no recommendation has been made by the Fitment Committee regarding the rate, so now the issue will be further discussed in the GST Council meeting. The committee consists of central and state GST officials, who advise the council on GST rates.
This issue has become a hot topic currently as senior Union Minister Nitin Gadkari has recently written a letter to Union Finance Minister Nirmala Sitharaman suggesting that health and life insurance should be kept out of the ambit of GST.