Cuts in GST on insurance premiums backed by IRDAI and Finance Ministry #IndiaFinance

The IRDAI and the Finance Ministry’s Financial Services Department have voiced support for a proposal to cut GST on insurance premiums.

The GST Council is scheduled to meet on 21 December and expected to restructure the GST on insurance premiums. A Group of Ministers (GoM) has advocated exempting premiums paid on health insurance for senior citizens, health insurance with coverage of INR500,000 and term life insurance. For all other policies, the GoM suggested retaining existing rates, reported The Hindu Business Line.

In a submission before a Parliamentary panel, the IRDAI said several developed countries, including the European Union and Canada, exempted insurance products from VAT or GST. This reinforces the argument for providing similar benefits in India to encourage greater insurance penetration, it said.

The insurance regulator argued that increased longevity and healthcare needs necessitate greater health insurance adoption.

To give relief to vulnerable sections of society, IRDAI has suggested extending GST exemption for retail health policies offered to senior citizens, microinsurance policies and term insurance policies up to a designated limit.

The Financial Services Department also supports the proposal to reduce GST.

At present, the GST rate on premiums for health, term and unit-linked insurance is 18%. For endowment plans, the GST is applied differently. While it is 4.5% for premium paid during the first year, it is 2.25% from the second year. For single-premium annuity policies, the GST rate is 1.8%.

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