GST Reduction Expected to Make Insurance More Affordable, Says Finance Department

According to a report, a representative from the Department of Finance has indicated that a reduction in Goods and Services Tax (GST) could lead to lower insurance costs for consumers. The official noted that the government has received requests to eliminate GST on term life insurance and health insurance premiums.

Currently, GST is applied to term life insurance premiums and premiums for health coverage paid by senior citizens. However, it is expected that the upcoming changes may exempt these premiums from taxation.

A recent meeting of the Group of Ministers (GoM), responsible for reviewing GST rates on life and health insurance, took place on Saturday. They have proposed exempting GST on health insurance premiums for plans covering individuals for up to Rs 5 lakh, excluding senior citizens. For health insurance coverage exceeding Rs 5 lakh, the existing GST rate of 18% will continue to apply.

Currently, an 18% GST is imposed on premiums for term life insurance and family floater policies. An official stated that the GoM members are generally supportive of reducing insurance premium rates, but a final decision will rest with the GST Council.

Bihar's Deputy Chief Minister, Samrat Chaudhary, emphasized that all members of the GoM are eager to provide relief to the public, with particular attention to senior citizens. The GoM plans to submit a report to the council soon, and the final decision will be made thereafter.

There is also potential for insurance premiums paid by senior citizens to be exempt from GST, regardless of the coverage amount. The GST Council had previously established a 13-member GoM to evaluate the tax implications for health and life insurance premiums. Chaudhary serves as the convenor of this panel, which includes ministers from various states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana.

The GoM is expected to present its report to the GST Council by the end of October.

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