Health insurance stocks rose up to 11% on December 3 as the GoM on GST rate rationalisation has proposed a flurry of measures for the sector.
The Group of Ministers (GoM) on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary proposed to reduce GST from 18% to 5% on health insurance premia.
The GoM also proposed to exempt GST on health insurance premia for senior citizens from current 18%.
The GoM also proposed to exempt GST on health insurance premia for non-senior citizens up to a cover of Rs 5 lakh per annum.
The GST Council will meet in Jaisalmer on Dec 21 to also take up the proposal of GST on life and health insurance premiums.
The GoM also proposed to exempt GST on pure term life insurance premia from current 18%.
The proposals led to a positive move for the health insurance stocks with Niva Bupa rising over 11% on December 3 while Star Health rose nearly 4%.
At 12:15 pm on December 3, the recently-listed Niva Bupa shares were trading 10% higher at Rs 81.88 apiece while Star Health stock was trading nearly 4% higher at Rs 485.3.
Finance Minister Nirmala Sitharaman on Monday said the cost of insurance to the policy holder is expected to come down if the GST Council recommends a reduction in GST rate on health and life insurance policies.
In a written reply in the Lok Sabha, she said the GST Council in its September 9 meeting had recommended to constitute a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on life insurance and health insurance.
"...The matter of review of GST rates on life and health insurance is pending before the GoM. If a recommendation for a reduction in GST rate is made by the GST Council, the cost of insurance to the policy holder is expected to come down on account of reduction in GST," she said.
Sitharaman said this while replying to the question on whether GST reduction on health insurance will be a step towards making healthcare more equitable.
To a query on how the government will ensure that insurance companies pass on the benefits of any GST reduction to consumers, rather than retaining them through increased premiums, Sitharaman said competitive pricing would bring down the cost of insurance.
"As the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly especially in a competitive market with many insurers as the cost of insurance will reduce to that extent," she said.
Currently, an 18% GST is levied on premiums paid for life and health insurance policies.
With inputs from PTI
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