The GST Group of Ministers (GoM) on insurance has proposed that health and life insurance premiums be exempted from the levy, in a move aimed at making insurance products more affordable and improving penetration in India’s underinsured market. The final decision will be taken by the GST Council after broader consultations with states, Bihar Deputy CM Samrat Choudhary said.
The GoM meeting, which was addressed by Finance Minister Nirmala Sitharaman on August 20, deliberated on the impact of such a tax cut. The Minister urged states to debate the proposals collectively to arrive at a balanced view. Bihar Deputy Chief Minister Samrat Choudhary, a member of the panel, confirmed that the GoM has recommended full exemption of GST on health and life insurance.
Some states, however, flagged concerns over potential revenue losses from the exemption, even as others backed the proposal.
Rajasthan GST Council member Gajendra Singh said that while GST reforms had not caused major losses to states so far, proposals such as lower duty on solar equipment could have some revenue implications.
Revenue loss and safeguards
Telangana Deputy Chief Minister Mallu Bhatti Vikramarka said the GoM’s proposal for a complete exemption on health and life insurance premiums for individuals would entail an estimated revenue loss of Rs 9,700 crore annually.
He added that the panel was of the view that a mechanism must be put in place to ensure that the benefit of nil GST is passed on to consumers in the form of lower premiums, rather than accruing to insurance companies.
The GoM has recommended that the exemption cover all individuals purchasing health or life insurance policies, and not just senior citizens
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