IRDAI Seeks Feedback on GST Rate for Insurance Sector

By: Admin | Date: December 31, 2024 | Category: GST Recent News | Read Time: 4 Minutes


The Insurance Regulatory and Development Authority of India (IRDAI) has initiated discussions with the insurance industry to explore the optimal Goods and Services Tax (GST) rate for the sector. This effort aims to ensure tax benefits can be passed on to policyholders effectively.


Industry Consultation Process

  1. Stakeholders Involved:

Life and health insurance companies.

Representation through Life Insurance Council and General Insurance Council.

  1. Submission Process:

Industry recommendations will be compiled by the councils and submitted to the IRDAI.

The IRDAI will forward consolidated feedback to the Ministry of Finance for consideration.


Current GST Rate on Insurance

Health Insurance Premiums: 18%.


Proposals by the Insurance Industry

Health Insurance Companies:

Reduction to 12% GST, along with full Input Tax Credit (ITC) benefits.

Advocating for nil or 5% GST for:

Senior citizens.

Policies with coverage up to ₹5 lakh (with ITC retained).

Life Insurance Companies:

Seeking 0% or 5% GST with complete ITC benefits.


Rationale for GST Reduction

Operational costs: Insurers reportedly spend ₹6 for every ₹100 of premium earned.

Relief for policyholders, especially senior citizens and those purchasing basic health coverage.


Recent Developments

The 55th GST Council Meeting (December 21, 2024, in Jaisalmer) deferred the decision on GST rate reductions.

Finance Minister Nirmala Sitharaman stated that the matter would be revisited after feedback from the IRDAI and industry.


Implications

Potential reduction in premium costs for policyholders.

Enhanced affordability for senior citizens and low-coverage policies.



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