GST Council may allow input tax credit for employee group insurance

"ITC on group health and life insurance policies may be taken up for discussion. But there is no proposal to exempt these policies from GST. They will continue to attract 18 per cent," official said

The Goods and Services Tax (GST) Council may deliberate on extending input tax credit (ITC) to corporates providing health and life insurance cover to their staff, a senior government official told Business Standard. This comes even as such group policies are set to remain outside the ambit of GST exemption, the official added.

 

ITC allows businesses to offset the tax paid on inputs against their output tax liability.

 

“ITC on group health and life insurance policies may be taken up for discussion. But there is no proposal to exempt these policies from GST. They will continue to attract 18 per cent,” the official said.

 

An email sent to the finance ministry remained unanswered till the time of going to press.

 

The Centre’s exemption plan is limited to health and life insurance premiums purchased directly by individuals, including family floaters.

 

The Group of Ministers (GoM) on health and life insurance has endorsed this proposal. The GoM’s report will be taken up by the council on September 3-4.

 

“If GST relief on insurance is confined only to individual policies, it risks missing the bigger picture. A large share of India’s insurance penetration comes through corporate-backed group covers. Yet corporates would face a double burden — bearing higher GST on premiums while being denied corresponding ITCs. Unless group policies are also brought under the ambit of relief, both employers and employees lose out. A balanced framework, covering individual and corporate policies alike, is critical to make insurance affordable and sustainable,” said Manoj Mishra, partner and tax controversy management leader, Grant Thornton Bharat LLP.

 

Currently, health and life insurance premiums are taxed at 18 per cent.

 

According to data from Insurance Regulatory and Development Authority of India (Irdai), of the total group health insurance policies sold in FY24, 3.73 million were group covers provided largely by corporates.

 

In life insurance, 45,659 group policies were issued during the year.