According to several media reports, the 54th meeting of the Goods and Services Tax (GST) Council, scheduled to be held on September 9, 2024, in New Delhi, may discuss the possibility of removing the 18 per cent GST on term life insurance premiums. Several stakeholders in the insurance sector have long been advocating for this removal.
Industry experts believe that the implementation of this decision, i.e. the removal of this tax, would significantly ease the financial burden on insurance customers. The 18 percent GST tax on life and health insurance premiums has been controversial for a long time and many stakeholders are pushing for its removal.
“Several stakeholders, including acting ministers, have requested exemption Goods and Services Tax (GST) on Health and Life Insurance“The GST Council is likely to look favourably on this demand from the industry, especially if the revenue loss due to granting such exemption is not material. However, to enable the full effect of the GST exemption to be passed on to the general public, insurance companies should also be entitled to full tax credit without requiring a reversal of credit due to GST exemption on term insurance,” said Sandeep Pareek, Partner, Indirect Tax, BDO India.
Currently, 18 percent GST on term life insurance premiums is added to the cost of insurance.
“Term life insurance is, in essence, an insurance that acts as a safeguard to ensure that families are protected in the event of the death of the policyholder. When the government levies such high tax rates on such premiums, it discourages people from taking risks by opting for this necessary protection. Further reduction or complete elimination of GST may lead to an increase in term life insurance uptake, which is still in its infancy in the country,” said Siddharth Maurya, Founder and Managing Director, Vibhavangal Anukulakara Private Limited.
Why should GST be removed from insurance products?
Sandeep Pareek highlights that exempting term insurance products from GST could significantly promote these plans by making them more affordable for the public.
Siddharth Maurya adds: “Reducing or eliminating GST on term insurance premiums could encourage more people to secure their families’ future without additional financial burden. This would also widen the insurance coverage base, encouraging growth in the sector.”
Maurya also believes that such a move could transform India’s insurance sector. “It would demonstrate the regulator’s commitment to making life insurance more accessible and effective as a risk management tool. We anticipate that the GST Council will take a forward-thinking approach that will benefit millions of Indians.”
Trinamool Congress (TMC) leader and Rajya Sabha MP Derek O’Brien has urged Finance Minister Nirmala Sitharaman to remove GST on health and life insurance premiums. In a letter dated August 24, O’Brien said, “The 18% GST on health and life insurance premiums puts undue pressure on many people, affecting their access to crucial financial protection in the event of illness, accident or premature death. It is our shared responsibility to ensure that this vital safety net remains affordable to all segments of society.”
The GST Council, which comprises the Union Finance Minister and representatives from all states and Union Territories, was set up to oversee decisions on various GST-related matters such as tax rates, exemptions and administrative procedures. It has been instrumental in shaping India’s GST framework.
Disclaimer: The opinions and recommendations expressed above are those of individual analysts and not those of Mint. We recommend that investors consult with certified experts before making any investment decisions.
Catch all the Business News, Market News, Breaking News Events and Latest news Updates in Live Mint. Download Mint News App for daily market updates.
FurtherLess
Disclaimer
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.