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GoM to propose GST exemption on health, life insurance for individuals
At present, 18 per cent is levied on health and life insurance premiums for individuals.
'The Centre's proposal is to exempt health and life insurance premiums for families and individuals. All members agreed with the proposal. However, some states have expressed concern over the Centre's proposal to exempt health and life insurance premiums from GST,' he said after a meeting of the GoM. He added the GoM would submit its report to the GST Council for approval.
According to finance-ministry sources, the council is likely to meet in the third week of September.
Telangana Deputy Chief Minister Mallu Bhatti Vikramarka, who is member of the GoM, said every state wanted health and life-insurance premiums to be exempt from GST.
'Telangana is of the view that some mechanism should be worked out so that the benefit of lower rates goes to the people. The council will deliberate on the mechanism,' Vikramarka said, adding that the proposed changes were expected to lead to an overall revenue loss of nearly ₹9.7 billion per annum.
Saurabh Agarwal, partner with EY, said exempting insurance from GST would not lead to the entire benefit going to the insured.
'Insurance companies won't be able to claim back the GST they pay on their own expenses, like commissions, office rent, and software. The final price reduction for consumers will only be the net amount after accounting for this new input tax cost. If the tax had been 'zero-rated' instead of 'exempt', companies could have claimed a refund for the GST paid on their inputs, and consumers would have seen a full reduction of the tax from their premiums,' Agarwal added.
Addressing the three GoMs on compensation cess, health and life insurance, and rate rationalisation at Vigyan Bhawan, Union Finance Minister Nirmala Sitharaman on Wednesday said the Centre's proposals were part of a vision to usher in 'the next generation of GST reforms' in India's journey to becoming an Aatmanirbhar Bharat.
'The central government remains committed to building a broadbased consensus with the states to implement the next generation of GST reforms in the spirit of cooperative federalism,' Sitharaman added.
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