The GST Council has decided to delay its decision on reducing tax rates for life and health insurance premiums, following complex technical considerations during its 55th meeting held on Saturday. The meeting, chaired by Union Finance Minister Nirmala Sitharaman, concluded that further deliberations were necessary before finalizing any changes to the current tax framework. This deferral was largely driven by the need for more detailed discussions, particularly regarding the taxation of various types of insurance policies, including group policies, individual policies, and those specifically designed for senior citizens.
A Group of Ministers (GoM) led by Bihar Deputy Chief Minister Samrat Chaudhary was tasked with conducting additional consultations to resolve the issues at hand. According to Chaudhary, more time is required to address technical issues and achieve a clear consensus on how to implement the proposed reforms. These discussions are expected to continue into January, with a follow-up GoM meeting scheduled to finalize the proposals.
In November, the GoM had recommended certain reforms to ease the tax burden on insurance premiums. One of the key proposals was to exempt premiums paid for term life insurance policies from the Goods and Services Tax (GST). Additionally, premiums paid by senior citizens for health insurance were also suggested for exemption, along with premiums for non-senior citizens whose health insurance coverage did not exceed Rs 5 lakh. However, premiums exceeding Rs 5 lakh were proposed to remain subject to the standard GST rate of 18%.
The delay reflects the need for further technical assessments and consultations to iron out the details of these recommendations. States have expressed varying opinions on the proposed changes, with many supporting the idea of reducing the tax burden on life and health insurance premiums. However, the differing viewpoints among states have made it challenging to reach a unanimous decision. Despite this, a positive resolution remains likely, as most states are in favor of reducing the tax load on insurance premiums, though it will require additional time for all parties to come to an agreement.
As the deadline for finalizing these decisions extends into the new year, industry stakeholders, particularly insurance companies and policyholders, are closely monitoring the progress. The outcome of these deliberations will likely have significant implications for the affordability of insurance policies in India, particularly for senior citizens and those seeking basic health coverage.
