In the upcoming GST Council meeting this month, life and health insurance policyholders can expect some relief. The all-powerful GST council is expected to reduce or completely abolish the GST on life and health insurance premium. This issue has been pending for a long time, but now there are indications that some concrete steps can be taken this time.
IRDA supports GST exemption recommendations
The Group of Ministers (GoM) formed on insurance has also reportedly recommended the complete removal of GST on term life insurance and health policies of senior citizens. Apart from this, GST exemption has also been talked about on policies with health cover up to Rs 5 lakh, various reports suggest. Before taking a final decision on these recommendations, the opinion of the insurance regulatory body IRDAI was sought, which was submitted to the council in December 2024 itself.
If these recommendations are approved, it will be considered a big step towards making health and life insurance cheaper for the general public.
What do insurance sector experts say?
Insurance sector and tax experts believe that this change can increase the reach of insurance in the country and can also provide financial security to the economically weaker sections.
Hanut Mehta, CEO & Co-Founder, BimaPay Finsure says: “The proposed reduction in GST on health insurance premiums from 18% to 5% is a timely and progressive step that can significantly impact the affordability and accessibility of health coverage in India… We view this development as a structural enabler in expanding access to health insurance, empowering more Indians to adopt a planned approach to healthcare financing.”
Also read: GST Council Meet coming up: Relief on life and health insurance premiums likely on agenda
Tax expert Jignesh Ghelani, Partner, Dhruva Advisors says: “At the outset it is important to understand that in the current era, insurance is a necessity for everyone… Reduction in the GST rates say to 5% is indeed a positive step and will certainly help in deeper penetration of the sector in India…”
Why is this insurance GST rate rationalisation decision necessary?
Health insurance penetration is still limited in India. According to an estimate, the penetration of health insurance in the country is less than 40%, and the contribution of insurance premium to GDP is much below the world average. On the other hand,
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