GST Council may waive 18% tax on senior citizens' insurance plans in Dec

The GST Council is scheduled to meet in Rajasthan on December 21 and 22 to discuss potential tax relief on select insurance plans

The GST Council is expected to discuss potential tax relief on select insurance plans at its upcoming meeting in Rajasthan on December 21–22, according to a report by The Times of India. The Council may consider eliminating the 18 per cent goods and services tax (GST) on term insurance plans and health insurance policies, particularly for senior citizens and coverage plans up to Rs 5 lakh.

 

Key proposals for insurance tax relief

The upcoming GST meeting will likely focus on insurance-related GST relief. Health insurance premiums currently generate around Rs 2,500 crore in GST revenue, a significant amount that has prompted cautiousness among states regarding a potential rate reduction.

 

 

Bihar Deputy Chief Minister Samrat Chaudhary, who leads the GST rate rationalisation committee had earlier said, “Every GoM member wants to give relief to people, with a special focus on senior citizens.”

 

Concerns on broader GST rate cuts

Broader changes to GST rates for goods and services are not expected during this meeting. Currently, GST is levied across four slabs: 5 per cent, 12 per cent, 18 per cent, and 28 per cent, with the two highest slabs accounting for about 75 per cent of revenue. Given the Centre’s recent cessation of revenue compensation to states, there is added caution around reducing tax rates.

 

Health insurance GST relief and panels

This discussion on health insurance GST relief gained momentum after Transport Minister Nitin Gadkari urged Finance Minister Nirmala Sitharaman to remove indirect taxes on health insurance, arguing it imposed an unfair burden on consumers, in a letter in July. Sitharaman later said that the letter was never meant to be public.

 

The GST Council has since assigned a group of ministers to evaluate rate adjustments in insurance. In addition, another panel, led by Minister of State for Finance Pankaj Chaudhary, is reviewing the future of the GST compensation cess on luxury and ‘sin’ goods, which is set to remain until March 2026.

 

Concerns with cutting GST on insurance

Although Covid-19-related claims have decreased, insurers have maintained higher premiums, citing increased handling costs. This has led to concerns that insurance providers might not pass on any GST relief to policyholders.   The GST Council is scheduled to meet in Rajasthan on December 21 and 22.