The Insurance Regulatory and Development Authority of India (IRDAI) is holding talks with the insurance industry to determine the optimal Goods and Services Tax (GST) rate that would allow companies to pass on tax benefits to policyholders, sources told CNBC-TV18.

Life and health insurance companies are expected to present their views through their respective councils—the Life Insurance Council and the General Insurance Council. These councils will compile the industry’s recommendations and submit them to the IRDAI. Subsequently, the IRDAI will forward its consolidated views to the Ministry of Finance for consideration.

Currently, GST on health insurance premiums stands at 18%. However, the health insurance sector is pushing for significant reductions. Many health insurers want a reduction to 12%, coupled with full Input Tax Credit (ITC) benefits.

Some insurers want an even lower GST rate of nil or 5%, specifically for senior citizens and policies with coverage up to ₹5 lakh, provided ITC benefits are fully retained.

These proposals align with the operational costs of health insurers, who reportedly spend ₹6 for every ₹100 of premium earned.

Life insurers are also advocating for tax relief, recommending a GST reduction to 0% or 5%, again with complete ITC benefits.

The 55th GST Council meeting, held on December 21 in Jaisalmer, Rajasthan, deferred the decision to reduce GST rates on insurance premia. Finance Minister Nirmala Sitharaman had stated that the Group of Ministers (GoM) would revisit the matter after receiving feedback from the insurance regulator.

Source: CNBC TV 18