Ahead of the upcoming GST Council meeting, sources reveal that there could be deliberations on reducing the GST rate currently levied on life and health insurance premiums. According to information obtained by CNBC-TV18, the Council is set to discuss recommendations put forward by the fitment panel, which has been closely reviewing the current 18% GST rate applied to insurance premiums.

The fitment panel has reportedly recommended that only pure-term individual life insurance policies and reinsurers should be exempted from GST. If implemented, this change is expected to have a revenue implication of approximately ₹213 crore. However, sources emphasise that any reduction in the GST rate should be passed on to consumers by the life insurance companies. The GST Council will discuss the life insurance proposals in greater detail during its upcoming meeting.

For health insurance, the fitment committee has presented four possible options for reducing the GST burden, each with varying revenue implications:

1. Full exemption for health insurance premiums and reinsurers, which could result in a potential revenue loss of ₹3,500 crore.
2. Exemption for senior citizens’ premiums and those with coverage up to ₹5 lakh, which may have a revenue implication of ₹2,100 crore.
3. Exemption limited to premiums paid by senior citizens, with a projected revenue impact of ₹650 crore.
4. Reducing the GST rate on all health insurance services to 5% without input tax credit (ITC), which could result in a revenue loss of ₹1,750 crore.

However, the fitment panel has been unable to reach a consensus on the health insurance matter, leaving the final decision in the hands of the GST Council.

The GST Council is scheduled to meet on September 9, where the insurance proposals are expected to be a key agenda item.

Source: CNBC TV 18