The Goods and Services Tax (GST) Council is set to meet on Monday to discuss potential relief measures for health insurance. The Council will review four proposals that could significantly impact the GST treatment of health insurance, with estimated financial implications ranging from approximately Rs 650 crore to Rs 3,500 crore.
The proposals, developed by the Council’s fitment panel, include:
- Full exemption for all health insurance premiums and reinsurance.
- Reduction of the GST rate from 18% to 5% on health insurance services.
- Exemption for premiums paid by senior citizens and for policies with coverage up to Rs 5 lakh.
- Exemption solely for premiums paid by senior citizens.
Each option has different financial impacts on government revenue. The potential costs are Rs 3,495 crore, Rs 1,730 crore, Rs 2,110 crore, and Rs 645 crore, respectively.
In addition to health insurance, the panel also examined the possibility of exempting life insurance premiums from GST. It suggested limiting the exemption to pure-term individual life policies and reinsurers, which could result in a revenue impact of Rs 210 crore. The panel emphasized that any tax reduction should be matched by insurance companies passing on the benefits to policyholders.
Currently, the GST on individual health insurance premiums generates Rs 6,354 crore in revenue, according to data from the Department of Financial Services (DFS). The DFS argues that reducing GST could lower premiums, increase insurance coverage, and help achieve the “Insurance for All” vision by 2047.
Union Finance Minister Nirmala Sitharaman and Union Minister of Road Transport and Highways Nitin Gadkari have both voiced support for reducing GST on insurance premiums, citing the tax burden on policyholders and the sector’s development.
The GST Council’s decision could play a crucial role in making health insurance more affordable and accessible across India.