Centre Proposes GST Exemption for Life and Health Insurance Policies

The Centre has proposed exempting life and health insurance policies from GST, currently set at 18% for premiums. A Group of Ministers (GoM) discussed the proposal, with most states supporting it contingent upon ensuring benefits reach policyholders. The GST Council is yet to finalize the decision.

The Centre has made a significant proposal to exempt life and health insurance policies from the Goods and Services Tax (GST), aimed at alleviating financial burdens on individuals. Currently, such policies impose an 18% GST on premiums, a cost that the new proposal seeks to remove.

This proposal was the focal point of a recent 13-member state Group of Ministers (GoM) meeting, where almost all state representatives stood in favor, provided a robust mechanism ensures that the tax reduction directly benefits the policyholders rather than insurance firms. Telangana Deputy Chief Minister Mallu Bhatti Vikramarka underscored the importance of such a mechanism.

The estimated annual revenue loss from implementing this exemption is around Rs 9,700 crore. The GoM is slated to submit a report to the GST Council, incorporating diverse state opinions and suggesting tax rate categories under new GST reforms. This report is due by the end of October.