The Goods and Services Tax (GST) Council is expected to discuss the long-pending demand of tax relief on life and health insurance premiums at its upcoming meeting, according to a report published by MoneyControl. During the meeting, the Group of Ministers (GoM) is likely to support a complete GST exemption on term life insurance along with health cover for senior citizens.
The GoM had earlier suggested waiving GST on health insurance policies with coverage up to Rs 5 lakh, aiming to make insurance more accessible to common man.
Currently, both life and health insurance premiums are taxed at 18% GST. While the central government has been considering rate reduction, industry players have been pushing for a lower rate for better affordability and higher penetration.
Government projections, as quoted by MC, indicate that these proposed exemptions could result in an annual revenue loss of about ₹2,600 crore: ₹200 crore from term life insurance and ₹2,400 crore from health insurance.
The push for GST relief isn’t something new, industry players have been demanding it for years due to India’s low insurance penetration. As per the Economic Survey 2024-25, insurance penetration in India still stood at 3.7% of GDP in FY24.
What Happened At Last GST Meet?
In December 2024, the council introduced some new taxation frameworks but deferred discussions on various long-due and anticipated matters, including the taxation of insurance policies.
It recommended a reduction in the GST rate on Fortified Rice Kernel (FRK) to 5%, and full exemption on gene therapy. In addition, the rate of Compensation Cess was reduced to 0.1% on supplies to merchant exporters at par with the GST rate on such supplies.
Finance Minister Nirmala Sitharaman also clarified that used EV and individual selling to another individual will attract no tax, but a company/registered used car seller dealing with resale of EV/petrol/diesel will have to pay 18% on the margin value.
Besides these decisions, the council also stated that only popcorn with added sugar will be taxed differently at 12%. Popcorn sold as namkeen considered under the 5% GST slab without packaging.
