GoM discusses Centre’s proposal to scrap GST levy on health, life insurance for individuals; Most members want tax to be nil
The Group of Ministers (GoM) has initiated discussions on the Centre’s proposal to scrap the Goods and Services Tax (GST) on health and life insurance premiums for individuals. This move, if approved, could significantly reduce the cost of insurance products and enhance affordability for millions of citizens.
Currently, both health and life insurance premiums attract an 18% GST levy, which increases the overall burden on policyholders. During the deliberations, a majority of the GoM members expressed strong support for setting the GST rate at nil for individual policies.
Why Is This Move Important?
Insurance is considered a vital social security tool, offering financial protection in emergencies. However, the high GST rate has often been seen as a deterrent for middle-class and lower-income families who already struggle with rising healthcare expenses and financial planning.
Key Points from the GoM Discussion:
Focus on affordability: Removing GST will make insurance more accessible, encouraging more individuals to buy policies.
Boost to penetration: India’s insurance penetration remains below global standards. This tax relief could expand coverage significantly.
Support from states: Most states represented in the GoM reportedly favor a complete exemption for individuals.
Final decision pending: The proposal will soon be placed before the GST Council for final approval.
Expert Views
Industry experts have welcomed the discussion, saying that removing GST will encourage more citizens to secure financial protection. Insurers believe this step aligns with the government’s vision of universal health coverage and improved financial inclusion.
Vizzve Finance Insight
According to Vizzve Finance, this move could be a game-changer in the Indian insurance sector. With reduced costs, individuals will find insurance more attractive, and the industry could witness a surge in policy enrollments. Vizzve highlights that financial inclusion depends not just on availability but also on affordability — and scrapping GST could accelerate both.
Impact on Individuals
If implemented, individuals will save directly on their premiums. For example, a health insurance plan costing ₹20,000 annually currently requires an additional ₹3,600 as GST. With exemption, this burden will disappear, making policies more budget-friendly.
Frequently Asked Questions (FAQs)
Q1. What is the current GST rate on health and life insurance?
At present, both health and life insurance premiums are taxed at 18% GST.
Q2. Why is the Centre considering scrapping GST on insurance?
The aim is to make insurance more affordable, increase penetration, and support citizens in managing healthcare and financial risks.
Q3. Will this exemption apply to corporate group insurance policies too?
The GoM discussions primarily focus on individual policies, though further clarity may emerge when the GST Council takes a final decision.
Q4. How much can an individual save if GST is removed?
On a policy worth ₹20,000 annually, the GST component of ₹3,600 will be saved, reducing overall costs significantly.
Q5. When will the final decision be announced?
The proposal will be placed before the GST Council, and a final call is expected soon.
Published on : 21st August
Published by : Selvi
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