Insurance is a way opted by innumerable people to protect themselves from the uncertainties of the future, especially health and life insurance. The insurance sector is now one of the most significant sectors and just like every other sector, it has deep relations with taxation. The Income Tax Act of 1961 has several provisions that offer deductions or incentives to ease an individual’s tax liability regarding health and life insurance premiums. However, people still experience financial burdens as the rate of premiums has seen a significant rise due to inflation and growing healthcare needs.

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The Goods and Services Tax (GST) Council of India announced the formation of a new Group of Ministers (GoM) that would work primarily on assessing taxation concerns on health and life insurance premiums. The GST Council took this decision during their 54th meeting held on September 9th, 2024 under the leadership of India’s Union Finance Minister, Smt. Nirmala Sitharaman.

This decision of the GST Council aims to reduce the financial burden from the shoulders of the people of India and rationalise GST rates in the insurance sector.

Also read: Union Budget 2024: Revised Income Tax Slabs Under New Regime by FM Sitharaman

What Is The Current GST On Health And Life Insurance Premiums?

As of today, the GST rate on health and life insurance premiums is 18%. The general public, insurance companies, and other related stakeholders have been demanding and requesting its reduction. Arguments on this topic have been going on for quite some time and many believe that lowering the GST rate would enable millions of people from all backgrounds to enter the insurance sector and avail of its services.

It has been recorded that in the last fiscal year. i.e. in 2023-24, the Indian government collected over Rs. 8262 Crores in GST from the health and life insurance premiums alone.

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Key Decisions Of The 54th GST Council Meeting

The major decisions taken by the GST Council in its meeting are underlined below:

• Formation of a Group of Ministers (GoM): The GST Council has announced the formation of a Group of Ministers (GoM) to comprehensively review the existing GST rates imposed on health and life insurance premiums. The GoM would be led by the Deputy Chief Minister, Shri Samrat Choudhary, the head of GST rate rationalisation. The GoM is responsible for preparing a detailed research report on the imposed tax on health and life insurance premiums and its impact on the people of India. This report will be submitted by the end of October 2024 for further action.

• Directive of the GoM: The GoM may explore the possibility of reducing the GST rates on health and life insurance premiums. It will attempt to reduce the current GST rate of 18% or work on granting subsidies to certain sections of the economy such as senior citizens or other vulnerable groups.

• Rate Rationalisation: The GoM is also expected to work on GST rate rationalisation which means organising tax rates across different sectors.

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Important Timelines For GoM

The GoM is scheduled to submit and present its report by the end of October 2024 to the GST Council. The GST Council will then review it and work on a final decision on whether to reduce the GST rate on health and life insurance premiums.

It is important to mention here that the GST Council has already made notable tax deductions from 12% to 5% on drugs for cancer. This supports the government’s commitment to safeguarding the interests of its citizens.

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Conclusion

The GST Council’s decision to form a GoM to study and review the current tax imposition on health and life insurance premiums is a significant step towards making healthcare accessible and affordable for all.

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Important Links

Official Website: https://gstcouncil.gov.in/

Contact Information: https://gstcouncil.gov.in/contact-us