Exclusive | Cheaper life & health insurance has GoM’s blessings, final call in GST Council meet: Sources

Indians may soon get to pay less for life and health insurance, if the Goods & Services Tax (GST) Council accepts what we learn the Group of Ministers (GoM) on insurance will be recommending. Sources tell CNBC-TV18 that the GoM’s recommendations, which are to be submitted to the GST Council when it meets for the 55th time on Saturday, December 21, in Jaisalmer in Rajasthan, include a complete exemption of GST on individual term life insurance policies and their reinsurance.

However, we also learn that the report says, “the GoM is of a view that the current GST rate of 18% should remain on group term life insurance.” But the GoM has not closed the door on this matter completely, with the report going on to say, “if Council feels it appropriate, then it can mandate the Fitment Committee to look into this aspect in detail and can get it examined later on.”

We further learn that the GoM is set to recommend “exempting individual health insurance for senior citizens, and reinsurance from current 18% GST.” Sources add that the GoM is also in favour of completely exempting the 18% GST that is currently applied on the premium paid for individual health insurance policies that provide a cover of up to ₹5 lakh. Reinsurance premium for these policies, which also attracts 18% GST, is also to be exempt.

If accepted, the recommendation to exempt GST on premium for individual term life insurance policies could mean a revenue implication of ₹202 crore annually, while the exemption on reinsurance would work out to a revenue implication of around ₹96 crores per annum. The exemption on health insurance policies has been assessed as costing the government ₹2,110 crores per year.

However, sources say that the GoM will tell the Council that it “could not decide as to what should be the GST rates on health insurance for Persons with Mental Illness (PMI). Thus, it has recommended that the matter be examined in detail by the fitment committee along with the views of Department of Financial Services.” Any recommendations arising from these deliberations will be taken up by the council at a later date.

Any GST relief from this area, however, will not apply across the board. The GoM is of the opinion that no rate changes are required when it comes to health insurance premium for people who are below the age of 60 years (non-senior citizens), if the insurance cover exceeds ₹5 lakh per annum.

The final call on accepting or rejecting these recommendations by the GoM will be taken by the GST Council when it meets on Saturday. It is also possible that the council may choose to modify the recommendations of the GoM before adopting and ratifying them.