GST Council Edges Closer To Slashing Insurance Premium Taxes, Final Call Next Meet

The Fitment Committee, consisting of officials from both the Centre and states, presented a detailed report on Monday analysing the impact of a GST reduction on life, health, and reinsurance premiums

In its 54th meeting, chaired by Union Finance Minister Nirmala Sitharaman and including state finance ministers, the council discussed the possibility of rate cuts.

Source : PTI

The GST Council is moving towards a consensus on reducing the Goods and Services Tax (GST) on health and life insurance premiums, currently set at 18 per cent, though a final decision will be made in the next meeting, citing sources news agency PTI reported. In its 54th meeting, chaired by Union Finance Minister Nirmala Sitharaman and including state finance ministers, the council discussed the possibility of rate cuts.

Sitharaman on Monday decided to set up a Group of Ministers (GoM) on reducing tax rate on life and health insurance and cut GST on cancer drugs and namkeens. The Fitment Committee, consisting of tax officials from both the Centre and states, presented a detailed report on Monday analysing the potential impact of a GST reduction on life, health, and reinsurance premiums.

"Broad consensus has been reached on GST rate reduction for health and life insurance, but specific details will be finalised at the next council meeting," said a source familiar with the proceedings. Most states have expressed support for the rate cut, especially as monthly GST collections are on the rise, creating fiscal space for taxpayer-friendly measures. A reduction in GST on insurance premiums could benefit millions of policyholders by lowering their premium costs.

GST collections have stabilised at approximately Rs 1.75 lakh crore per month, a significant increase from the Rs 90,000 crore collected in the first year of GST, which was introduced on July 1, 2017. Prior to GST, insurance premiums were subject to service tax, but this was subsumed under GST during its implementation.

In the current fiscal year, the Centre and states have collected Rs 8,262.94 crore from GST on health insurance premiums and Rs 1,484.36 crore on health reinsurance premiums.

The taxation of insurance premiums has been a point of contention in Parliament, with opposition members and even Transport Minister Nitin Gadkari advocating for the exemption of health and life insurance premiums from GST. In response, Sitharaman had pointed out that 75 per cent of GST revenue goes to states, suggesting that opposition members raise the issue with their respective state finance ministers in the GST Council.

West Bengal Finance Minister Chandrima Bhattacharya also raised the matter of insurance premium taxation during a recent meeting of the Group of Ministers (GoM) on rate rationalisation, leading to its referral to the Fitment Committee for further study.