In the upcoming 55th GST Council meeting, scheduled to take place next month in Rajasthan, citizens may get a significant relief on health and life insurance premiums. The council is expected to consider lowering the current 18% GST on these premiums. According to sources, the meeting will primarily focus on health and life insurance, with the Group of Ministers having already submitted their report recommending a GST reduction on these premiums.
Potential Changes in GST Rates
The group has suggested removing GST on insurance premiums up to ₹5 lakh. For policies over ₹5 lakh, the council may consider reducing the GST from the current 18% to either 12% or possibly lower. Multiple states have agreed on reducing GST, as they recognize that health and life insurance are essential for citizens’ future security. However, some states have argued that completely removing GST would impact revenue significantly.
Impact on Revenue
Removing GST on policies up to ₹5 lakh alone could lead to an estimated revenue impact of ₹2,100 crore. To balance both perspectives, the council might opt to reduce GST only for premiums above this threshold, ensuring citizens get some relief while still securing state revenue.
Revenue from Health and Life Insurance
Both central and state governments receive substantial revenue from GST on health and life insurance. In the financial year 2022-23, total health insurance premiums amounted to approximately ₹90,032 crore, with individual health insurance contributing ₹35,300 crore. The current 18% GST rate collected about ₹6,354 crore from individual premiums alone.
Rationalizing GST Rates
The council is also working on rationalizing the existing GST slabs of 5%, 12%, 18%, and 28%. Last month, the newly formed Group of Ministers, led by Bihar’s Deputy Chief Minister Samrat Choudhary, discussed the need for further deliberation before reaching a final decision on rate adjustments.
| Insurance Type | Current GST Rate | Potential New Rate | Revenue Impact |
|---|---|---|---|
| Premiums up to ₹5 lakh | 18% | 0% | ₹2,100 crore reduction |
| Premiums above ₹5 lakh | 18% | 12% or lower | To be determined |
This meeting may bring a much-needed reduction in insurance premium costs, benefiting millions while still considering the impact on government revenue.
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