Representative image of an insurance policy document.
Credit: iStock Photo
New Delhi: The Goods and Services Tax (GST) on health and insurance premiums for individuals is likely to be reduced to zero from the current 18 per cent as part of the proposed next-generation reforms in the country’s indirect tax system.
A 13-member state group of ministers (GoM) at its meeting in Delhi broadly agreed to exempt individual insurance premiums from GST. This is in line with the Centre’s proposal.
“The Centre’s proposal is clear that individual and family insurance policies should be exempted from GST. The GoM report will be presented to the Council,” Bihar Deputy Chief Minister and convener of the GoM on insurance Samrat Choudhary told reporters.
“All members have given their approval for lowering rates. Some states have given their own views,” he said, adding a final call on rates will be taken by the GST Council, which is likely to meet in September.
Some states raised objections due to the potential revenue loss. The move is likely to result in a revenue loss of Rs 9,700 crore, Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka said. He emphasised the need for devising some mechanism to ensure that the benefits of the rate cut go to policyholders. The exemptions are proposed only for individual and family insurance policies.
GoM on insurance includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu and Telangana.
Union Finance Minister Nirmala Sitharaman also participated in the GoM meeting. “During the meeting, the Union Finance Minister emphasised that the proposal by the Union government is with a vision to usher in the next generation of GST reforms,” the Finance Ministry said in a post on X.
According to the Finance Minister, the GST reforms would rest on three pillars: structural changes, rate rationalisation and ease of living.
It added that the “upcoming GST reforms will ensure seamless, tech-driven and time-bound registration, introduce pre-filled returns to reduce errors and mismatches and enable faster, automated refunds, all aimed at simplifying compliance, supporting businesses and enhancing the overall ease of living and doing business”.