GST Council Meeting: Decision On Lowering Rates For Term & Health Insurance On Hold

The 55th meeting of the GST (Goods and Services Tax) Council held on Saturday, December 21, 2024, in Jaisalmer, Rajasthan, under the leadership of Union Finance Minister Nirmala Sitharaman. Media reports suggest that the council struggled to achieve consensus on crucial tax matters, especially those concerning insurance premiums.

According to the report by ‘The Economic Times’, some states raised their worries about lowering GST rates for term and health insurance. Hence, the decision has not been taken, and will now be reviewed in the next meeting.

Some states, including West Bengal, Kerala, and Karnataka, are opposing the proposal to lower the GST rate on term insurance from 18% to 5% and similarly reduce rates for health insurance premiums, said the report. This proposal was to benefit the middle class by making insurance more affordable.

A proposal to change the GST rates on insurance premiums was led by Bihar’s Deputy Chief Minister Samrat Chaudhary. According to the report, the main reason that the states didn’t reach the consensus was the worry about losing the revenue.

GST Council Meeting: Other Details!

In the fiscal year 2023-24, the central and state governments together earned Rs 16,400 crore in GST revenue from life and health insurance. Meanwhile, reducing tax rates could mean a loss of Rs 2,500 crore in revenue every year. This is a major concern for the states, especially when they no longer receive compensation to make up for revenue hits.

Earlier, the reports suggest that the Council may reduce the tax burden on life and health insurance premiums. Furthermore, the key recommendations included exempting GST on term life insurance policies, waiving off the GST on health insurance premiums for senior citizens, and exempting GST on health insurance policies with coverage up to Rs 5 lakh for non-senior citizens. Meanwhile, maintaining the 18% GST rate on premiums for policies covering over Rs 5 lakh was also among the recommendations.

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