GST on Health and Life Insurance Premiums: The Group of Ministers (GoM) is preparing to send a big proposal to the GST Council. The goal is to remove GST completely on health and life insurance premiums. Bihar Deputy CM Samrat Choudhary, who leads the GoM, said that all ministers agreed that insurance for individuals should not have GST. He also said the GST Council will take the final decision.
The Prime Minister had already promised in his Independence Day speech that the government is working on new GST rules to help common people. He even called the new system a Diwali gift.
What Happens to Insurance Premiums?
People rigth now pay 18% GST on both life and health insurance premiums. The new plan suggests that this rate can either go down to 5% or maybe even zero. In 2023-24, the government earned more than Rs 8,262 crore from GST on health insurance premium, and another Rs 1,484 crore from GST on reinsurance premium, reports Financial Express.
Next-Gen GST step towards a single tax slab GST
The new GST plan also says that there will be only two main tax rates in the future 5% for essential things and 18% for standard ones. This will remove the old 12% and 28% slabs. That is why many believe that insurance premium will finally get cheaper.
But some people in the industry are not fully happy. They warn that if GST becomes zero or 5%, companies will lose the Input Tax Credit benefit. That means insurers cannot adjust the tax they pay on their services, and this may increase their costs. If costs go up, premiums may again get expensive in another way.
Reliance General Insurance CEO Rakesh Jain shared his view on this. He said, “We welcome the government’s proposal to reduce GST on insurance premiums from 18% to 5%, as this will bring much-needed relief to customers and help improve insurance penetration in India. Insurance is not just a financial product—it is a safeguard for individuals, families, and businesses against life’s uncertainties.”
He also explained the worry about tax credits. “A key concern is the inverted duty structure, which leads to accumulation of unutilized input tax credits, as insurers are unable to offset taxes paid on many input services that attract higher GST rates,” he said. According to him, this mismatch can push up operating costs for insurers and make things less efficient.
He added, “Unless this anomaly is addressed, insurers may continue to face pressure on margins even as customers gain from lower premiums.”
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GoM Report
Now the GoM will write its full report and send it to the GST Council. This report will also include different opinions given by finance ministers from many states. Choudhary said, “The Centre’s proposal is clear that the individual insurance policies should be exempt from GST. This has been discussed and the GoM report will be presented to the Council.”
The GoM has 13 members from states like Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu and Telangana. It was formed last September only to work on insurance tax rates. They must send their final report by October end.
