GST Relief on Health Insurance: Council to Consider 4 Options

đź“… By Admin | September 07, 2024
đź“‚ Categories: #GST #RecentNews
⏳ 4 Min Read

GST Council to Review Health Insurance Tax Options

The Goods and Services Tax (GST) Council will examine four options for the tax treatment of health insurance during its upcoming meeting on Monday. These proposals could significantly impact government finances, with estimated implications ranging from Rs 650 crore to Rs 3,500 crore.

Four Key Options

  1. Full Exemption: This option would fully exempt health insurance premiums and reinsurance from GST.
  2. GST Rate Reduction: This proposal suggests lowering the GST rate on health insurance services from the current 18% to 5%.
  3. Targeted Exemptions: This option focuses on exempting premiums paid by senior citizens or those with coverage up to Rs 5 lakh.
  4. Senior Citizens Exemption Only: This would restrict GST exemption to health insurance premiums for senior citizens.

These options stem from a detailed analysis by the Council’s fitment panel, which includes central and state revenue officials. Earlier, the Department of Financial Services (DFS) requested a tax reduction on health insurance to make it more affordable and accessible.

Financial Implications

  • Full Exemption: Rs 3,495 crore
  • Rate Reduction to 5%: Rs 1,730 crore
  • Senior Citizens and Coverage up to Rs 5 Lakh: Rs 2,110 crore
  • Senior Citizens Only: Rs 645 crore

Additionally, the panel is considering GST exemptions for life insurance premiums. Specifically, it may limit relief to pure-term individual life policies and reinsurers, with an estimated revenue impact of Rs 210 crore. However, any tax reduction would depend on insurance companies passing the benefits to policyholders.

Rationale Behind the Proposal

The DFS argues that reducing GST on health insurance would encourage more people to purchase insurance, thereby lowering premiums and improving India’s low insurance penetration. In FY23, total health insurance premiums reached Rs 90,032 crore, with individual health insurance contributing Rs 35,300 crore (39%). At the current 18% GST rate, the government collected Rs 6,354 crore from individual health insurance premiums alone.

The DFS believes that increasing the number of insured individuals could counterbalance the short-term revenue loss and help achieve the government’s “Insurance for All” goal by 2047.

Government Reactions

Union Finance Minister Nirmala Sitharaman has noted that taxes on medical insurance existed even before GST. This response came after MPs demanded the removal of GST on medical insurance. Meanwhile, Union Minister Nitin Gadkari has advocated for removing the 18% GST on life and medical insurance premiums, arguing that the tax impedes sector growth.

The GST Council’s decision on these proposals could significantly reshape India’s insurance landscape, potentially making health insurance more accessible and affordable for millions.

#GSTRelief #HealthInsurance #TaxExemption #InsurancePolicy #GSTCouncil #FinanceReform

https://aaermlawassociates.com/gst-health-insurance-tax-review-september-2024/

Share on Facebook Share on Twitter