Government has held a key meeting with insurance regulator and industry stakeholders on the issue of GST reduction on health and term insurance premiums. Sources told ET NOW that officials from the Department of Financial Services (DFS), Insurance Regulatory and Development Authority (IRDAI) and industry experts met on Tuesday to discuss GST reduction proposal for insurance premium.
Sources said that insurers and DFS have likely reached a consensus for 12 per cent GST on health and term insurance premiums.
Insurers are said to have agreed to pass on the benefits to customers at 12 per cent GST rate, sources said.
The consensus for 12 per cent GST on insurance premium was reached after insurers expressed inability to pass benefit to policy holders at 5 per cent GST without input tax credit.
At 12 per cent GST rate, the revenue loss for the government is estimated at Rs 7000 crore.
The consensus proposal will now be sent to GST Council for the final approval.
Notably, the GST Council during its December 2024 meeting deferred the decision on insurance premium.
Currently, an 18 per cent GST is levied on premiums paid for life and health insurance policies.
There has been growing clamour for removing or lowering the current GST rate on the life and health insurance policies.
Earlier, sources had informed ET NOW that the group of ministers (GoM) have recommended complete exemption of GST on pure term life insurance premiums. A pure term insurance plan is a type of insurance policy that provides death benefits to the family of policyholder in case of their untimely death.
Back in December 2024, Finance Minister Nirmala Sitharaman , in a written reply in the Lok Sabha, had said that the cost of insurance to the policy holder is expected to come down if the GST Council recommends a reduction in GST rate on health and life insurance policies.
Source #ET
