India eyes GST exemption on health, life insurance premiums to boost affordability

The Group of Ministers on Insurance proposed on Wednesday exempting GST on health and life insurance premiums for individuals. This move would enhance the affordability and accessibility of insurance in India. The proposal will be put before GST Council in its upcoming meeting for a final decision, said Bihar Deputy Chief Minister Samrat Chaudhary on Wednesday.

Health and life insurance currently attract an 18 per cent GST. The Group of Ministers (GoM), led by Chaudhary, held discussions on the proposal moved by the Central Government for exempting GST on health and life insurance premiums. The GST exemption on insurance premiums would apply regardless of age, with no upper limit on coverage. Chaudhary said some states expressed concerns.

The financial implications of the proposed exemptions are expected to be around Rs 9,700 crore for states and the Centre, said Telangana Deputy Chief Minister Mallu Bhatti Vikramarka. “The meeting was good, and serious deliberations have taken place on life and health insurance. We all welcomed it. We made it very clear that the premium benefits have to go to the policyholders... Every state wants it to be brought down to zero because it is life and health insurance (for individuals). The proposal will be submitted to the GST Council,” Vikramarka said.

The GoM comprises ministers from 13 states, including Uttar Pradesh, West Bengal, Karnataka, Punjab, and Kerala. Finance Minister Nirmala Sitharaman also addressed the Group of Ministers on compensation cess, health and life insurance, and rate rationalisation at Vigyan Bhawan in New Delhi.

This development comes in response to long-standing demands from industry experts, financial advisors, and policyholders. They have highlighted the high GST rate as a barrier to insurance penetration in India. The Union Government’s proposal is part of a broader GST reform plan that envisages only two rates: 5 per cent for merit goods and 18 per cent for standard goods.