SBI Research division in a new research report has proposed that the government may consider no goods and services tax (GST) on insurance and separate deductions in new tax regime for social security.
The report released in January 2025 said providing separate deductions in the new tax regime for social security, will help revive the insurance sector. The research report said as per the Insurance Regulatory and Development Authority of India, insurance penetration in India dropped to 3.7% in FY24 from 4% in FY23 and 4.2% in FY22. This decline is mainly due to a decline in life insurance penetration, raising concerns over the IRDAI's mission of "Insurance for all by 2047".
The document has expressed hope that the government will focus on the following points to revive the insurance sector:
- Remove GST/Tax on term/pure life insurance and health insurance premiums
- Like National Pension Scheme, provide separate deduction of INR25,000 or INR50,000 for life/health insurance in the new and old tax regime
- Bring all the Government sponsored pension schemes under one umbrella
- Bring out a new insurance programme for micro, small and medium enterprise employees
- Revamp healthcare sector
The report has also proposed various measures to revamp the health sector. It has suggested a uniform GST rate of 5% to 12% on medical devices, from the current GST rates range from 5% to 18%.
"This uniform tax structure could simplify compliance, improve operational efficiency, and lower costs in the sector."
Further, the report said the government should target increasing healthcare spending to 5% of the GDP from 1.95% in FY24.
"A more aggressive target of 5% could be required to address the growing needs of India’s ageing and expanding population, it said while proposing to allocate proceeds from healthcare cess and the proposed 35% GST slab on tobacco and sugar products to strengthen public health programmes.