No tax reduction on life, health insurance premiums likely from GST council meet
India Today
The GST council's fitment committee on Monday turned down a proposal to reduce the 18 per cent tax levied on life and health insurance.
Despite the low penetration of life and health insurance in the country and the heightened medical concerns driven by the pandemic, the GST council is not likely to provide tax relief to those seeking life or medical insurance cover.
India Today found out that the fitment committee, a panel of central and state government officials working for the GST Council, rejected a proposal to lower the tax rate on premiums paid on a slew of insurance policies from life to health to third parties.
The agenda documents accessed from the GST council show that the fitment committee recommended “no change” to the request to remove the GST on life and health insurance. There is an 18% GST imposed on life and health insurance currently.
The GST at present is of three types. The first is the GST on Insurance Risk premium, the second is GST is collected on late fee and delayed loan interest paid due to a delay in payment of premium and interest on time. Third is the GST imposed on annuity policies which don’t contain any risk premium. GST is not collected on investment in banks, post office savings schemes, etc.
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The request for removal of GST on health insurance is backed by the argument that the 18% GST on policies is hampering penetration, which is the need of the day. The request states, “If one wants to invest Rs 1 lakh per year in health insurance his premium would be Rs 1,18,000 every year and this huge amount of GST is discouraging the prospect of getting it.”
However, the fitment committee backed the continuation of the tax levied on health insurance by saying that “this is a new exemption request and exemption or lowering the GST rate will lead to cascading of input taxes and result in distortion of the tax structure.”
