India is likely to either totally exempt or reduce the 18% Goods and Services Tax (GST) currently levied on life and health insurance premiums. This move, the insurance industry feels, will hopefully make insurance more affordable for policyholders.
While consumers certainly stand to benefit from lower costs, insurers may face margin pressures due to the loss of input tax credit. A group of ministers has already recommended a complete waiver and the matter is expected to be considered in the next meeting of the GST Council which is scheduled to be held in mid-September.
Industry captains are of the opinion that while the proposal will certainly make the life and health insurance covers much more affordable for the consumers, it may complicate matters for insurers, potentially squeezing their margins and leading to price adjustments.
Reliance General Insurance CEO Rakesh Jain said, “The inverted duty structure in GST often results in accumulated ITC that cannot be fully utilised. This mismatch increases operational costs and creates inefficiencies. Unless this anomaly is addressed, insurers will continue to face pressure on margins even if customers benefit from lower premiums.”
Mr Jain said, “Reducing the cost barrier will encourage more people to adopt health insurance, thereby strengthening the country's overall social security framework. We believe this reform has the potential to be a game-changer for the insurance ecosystem, creating long-term benefits for both customers and the economy.”
Ageas Federal Life Insurance MD and CEO Jude Gomes said, “Over time, this move will not only encourage higher insurance penetration and support the growth of the healthcare ecosystem, but also contribute to building a healthier, more productive India. Importantly, it aligns with the larger vision of ‘Insurance for All by 2047,’ driving deeper penetration across both urban and rural India."