The Goods and Services Tax (GST) Council is considering a reduction in GST rates on health and life insurance premiums rather than a complete exemption, according to official sources.
Currently, premiums are taxed at 18%, but the Council may bring this down to 5%, while still allowing insurers to claim input tax credit.
Members of the Group of Ministers (GoM) reviewing the tax structure largely support the rate cut, cautioning that a full exemption could inadvertently raise costs due to the accumulation of unclaimed input taxes.
However, some voices within the insurance industry argue that even a 5% rate may lead to unused tax credits and are instead advocating for a 12% GST rate on output to ensure better credit utilisation.
Financial Express India reported that a member of the GoM said, “We are not in favour of completely exempting life and health insurance premia from GST but wish to reduce the rates. We have finalised our report… now it’s up to the Council to decide.”
The GST Council is expected to convene in April or May to discuss the matter and review the report prepared by the Insurance Regulatory and Development Authority of India (IRDAI) regarding the taxation of insurance premiums.