With 56th GST Council set to meet on September 3-4, a much awaited benefit that could come to the people of India is expected to be in the form of complete exemption of GST on life and health insurance.
The Members of the Group of Ministers (GoM) on health and life insurance have reached an in-principle agreement that the burden of Goods and Services Tax (GST) on life and health insurance must be reduced, sources told CNBC-TV18. The proposal will be tabled in the form of the report of the GoM at the upcoming GST Council meeting, sources added.
According to sources, the GoM has broadly backed the Union government’s proposal to exempt all individual life insurance and health insurance policies from GST. However, several states, including Karnataka, West Bengal, Kerala, Punjab, and Tamil Nadu, have underlined that the exemption would only serve its intended purpose if insurers pass on the benefit directly to policyholders.
“Some states have raised concerns that insurance companies should not end up making windfall gains by retaining the tax benefit while policyholders continue to pay unchanged premiums. This issue has troubled states as the insurance regulator, IRDAI, has not expressly addressed it,” sources said.
GoM members stressed that the primary beneficiaries of any GST exemption must be policyholders and not insurance companies. They also deliberated on how to ensure that the benefit of a complete exemption is effectively passed on to customers.
“The estimated revenue impact of the Union government’s proposal stands at around ₹9,900 crore annually,” sources said.
As understood from sources, the Union government’s proposal includes:
1. Granting GST exemption to all individual life insurance policies, along with reinsurance.
2. Granting GST exemption to all individual and family floater health insurance policies, along with reinsurance.
The final decision will rest with the GST Council, which is expected to take up the proposal for its consideration.
Source: CNBC TV-18
