India’s GST cut may lower health, life insurance costs

Currently, an 18% GST is applied to premiums for health and life insurance.

The cost of insurance premiums for India’s policyholders could decrease if the GST Council recommends a reduction in the Goods and Services Tax (GST) rate on health and life insurance policies, Finance Minister Nirmala Sitharaman said, as reported by the Economic Times. 

In a written response to the Lok Sabha, she confirmed that the GST Council is currently reviewing the matter through a Group of Ministers (GoM) formed during its 9 September meeting.

Currently, an 18% GST is applied to premiums for health and life insurance. In the 2023-24 fiscal year, the Centre and states collected ₹16,398 crore in GST from these policies, with ₹8,135 crore from life insurance and ₹8,263 crore from health insurance. 

An additional ₹2,045 crore was raised from reinsurance.

The GoM, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, held its first meeting on October 19 and is expected to present its findings at the GST Council meeting on December 21 in Jaisalmer. 

According to sources, the GoM is considering GST exemptions for term life insurance and senior citizens’ health insurance premiums. 

It has also proposed exempting GST on premiums for health insurance coverage of up to ₹5 lakh, whilst retaining the 18% rate for policies exceeding that coverage.