Tax Breaks On Insurance Premiums Expected As GoM Supports GST Exemptions For Key Sectors

The ministerial panel set up to examine Goods and Services Tax (GST) rate exemption for term life insurance premium for all and health insurance premium for senior citizens is reportedly in favour of tax relief to consumers in these insurance categories.

This comes after the meeting convened on Saturday (19 October), where most members of the panel agreed in favour of extending such relief.

In addition, the GoM on GST rate rationalisation on Saturday deliberated on adjusting rates for various products and agreed to lower rates for several items such as packaged water above 20 litres (5 per cent from 18 per cent), bicycles costing less than Rs 10,000 (5 per cent from 12 per cent), and exercise notebooks (5 per cent from 12 per cent).

Shoes priced above Rs 15,000 and wristwatches over Rs 25,000 are expected to move into the top GST slab of 28 per cent, up from the current 18 per cent, according to a state finance minister.

This adjustment is projected to generate Rs 22,000 crore in revenue for both the states and the Centre, which will help offset losses resulting from the reduction in GST rates for insurance premiums and other items.

In the insurance sector, the likely outcome is a GST exemption on term life insurance premiums for everyone, including plans that consist of family members.

Senior citizens are expected to benefit from GST exemption on health insurance premiums.

For others, health insurance cover up to Rs 5 lakh is likely to be GST-free, while coverage above that amount will continue to attract an 18 per cent GST rate.

“Every GoM member wants to give relief to people. Special focus is on senior citizens. We will submit a report to the Council. Work is being done to reduce the GST rate from 18 per cent, exemption will be given for certain categories (of insurance premium). The final decision will be taken by the GST Council,” Bihar Deputy Chief Minister Samrat Choudhary, who is the convenor of the GoMs on insurance and rate rationalisation, said after the meetings, Indian Express reported.

The final decision will be taken after discussion at the next GST Council meeting, likely to be held in November-December.

“There were discussions held in the meeting. Most states are on board for exempting term life insurance premium from GST. Term life insurance plans which include family members are also going to be exempt. For health insurance, total relief would be given to senior citizens and exemption up to Rs 5 lakh cover would be for others. 18 per cent GST will be retained for health insurance cover above Rs 5 lakh,” a state finance minister was quoted in the IE report as saying.

During its 54th meeting on 9 September, the GST Council broadly agreed on reducing the tax rate on health and life insurance premiums from 18 per cent.

However, the specific proposal was passed on to the GoM for further review.

The six-member GoM on rate rationalisation was expanded to a 13-member panel to focus on life and health insurance premium issues, with a mandate to submit their findings by October-end.

Also Read: Assam Rifles Posts Allegedly Face Electricity Outage After Row With Mizoram Power Minister