New Delhi: The cost of life and health insurance could decrease if the GST Council approves
a reduction in tax rates on premiums, according to Finance Minister Nirmala Sitharaman. In a
written response to the Lok Sabha, Sitharaman stated that a Group of Ministers (GoM) is
currently examining GST rates for health and life insurance, following recommendations
made during the Council’s September 9 meeting.
“If the GST Council suggests reducing the tax rates, policyholders can expect lower
insurance costs due to the reduced GST burden,” Sitharaman explained. The current GST rate
on life and health insurance premiums is 18%.
Addressing concerns about whether insurers would transfer the benefits of reduced GST to
customers, Sitharaman expressed confidence in competitive market dynamics. “With multiple
insurers competing, reduced GST rates would directly lower insurance costs for consumers,”
she said.
The GST Council, chaired by Sitharaman and comprising state representatives, is set to
review the GoM’s findings during its meeting on December 21. In the 2023-24 fiscal year, the
combined GST revenue from life and health insurance policies amounted to ₹16,398 crore,
with ₹8,135 crore from life insurance and ₹8,263 crore from health insurance.
Additionally, ₹2,045 crore was collected from reinsurance GST, including ₹561 crore from
life reinsurance and ₹1,484 crore from health reinsurance. A GST rate reduction, if approved,
is anticipated to make insurance more affordable and equitable for consumers.
