The rate of goods and service tax (GST) paid on health and life insurance is likely to be reduced, CNBC-Awaaz reported on Thursday, August 8, citing people aware of the development. A proposal has been sent to the GST rationalisation committee, as per the news channel.
The proposal sent to the GST rationalisation committee entails a 5 per cent GST on health and life insurance premium payments; this is significantly lower than the 18 per cent GST applied currently, according to the sources quoted in the report. However, the committee is not in favour of the exemption of GST on premiums, as per the report.
HDFC Life Insurance, Life Insurance Corporation, SBI Life, and ICICI Prudential shares reacted well to the news report.
Mint could not independently verify this development.
The GST rate rationalisation committee is scheduled to meet on August 22, as per the report.
In July, Minister of Road, Transport and Highways Nitin Gadkari wrote to Finance Minister Nirmala Sitharaman proposing to withdraw the 18 per cent GST on life and medical insurance premiums. According to a Moneycontrol report, he called it a tax on life's uncertainties.
The government has said nearly ₹24,000 crore has been collected as GST from the health and life insurance segment in the last three years.
“Several suggestions have come up and I shall take up with the GST council,” said Nirmala Sitharaman in response to the topic in Parliament, as per the report.
“Up to 74 per cent of the amount collected (from health and life premiums) under the GST goes to the states,” said Sitharaman, as per the news report, highlighting that none of the ministers wanting to reduce the GST has asked to reduce it at the state level.
“I chaired the standing committee for five years - when we issued our report for insurance – it was unanimous. Everybody agreed that we should eliminate GST on life and health insurance because there are necessities for modern living,” former minister Jayant Sinha, one of the architects for GST, told the news portal.
