Finance Minister Nirmala Sitharaman has said that the cost of insurance to policyholders is expected to fall if the GST Council recommends a reduction in the GST rate on health and life insurance policies.
"The matter of review of GST rates on life and health insurance is pending before the GoM (Group of Ministers). If a recommendation for a reduction in GST rate is made by the GST Council, the cost of insurance to the policyholder is expected to come down on account of reduction in GST," reported Press Trust of India citing Mrs Sitharaman’s written reply to Lok Sabha, the lower house of Parliament. She was asked whether a GST reduction on health insurance would be a step towards making healthcare more equitable.
The GST Council in its 9 September meeting had recommended convening a GoM to look holistically into the issues pertaining to GST on life insurance and health insurance.
Insurance cost will fall because GST is charged on the insurance premium
To a query on how the government will ensure that insurance companies pass on the benefits of any GST reduction to consumers, rather than retaining them through increased premiums, Mrs Sitharaman said competitive pricing would reduce the insurance cost.
"As the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly especially in a competitive market with many insurers as the cost of insurance will reduce to that extent," she said
Currently, an 18% GST is levied on premiums paid for life and health insurance policies.
The GST Council, chaired by Mrs Sitharaman, is scheduled to meet on 21 December where the GoM report on the reduction of GST on life and health insurance is expected to be discussed.