š„ GST Exemption on Health & Life Insurance Needs Input Tax Credit for Policyholdersā Benefit
The Group of Ministers (GoM) has proposed exempting health and term life insurance from GST, currently taxed at 18%. This recommendation, if approved, could significantly impact policyholders and the insurance industry.
Key Points Discussed
- GoM’s Recommendations
GST Exemption: Suggested removal of GST on health and term life insurance policies.
Current Status: The proposal is awaiting deliberation in the 55th GST Council Meeting after the state elections in November 2024.
- Rising Loss Ratios in Health Insurance
Insurers have been facing increased loss ratios in their health insurance portfolios.
To manage losses, insurers have periodically raised premiums.
- Passing Benefits to Policyholders
Concerns: Thereās uncertainty if insurers will fully pass on the benefits of a GST exemption to policyholders.
IRDAI Chairman’s View: Debasish Panda emphasized the need for the government to ensure that policyholders benefit directly.
Input Tax Credit (ITC) and Its Role
ITC’s Importance: Panda highlighted that GST exemption coupled with Input Tax Credit is necessary for insurers to offset costs and pass on the savings to policyholders.
Boost in Demand: An exemption could drive demand for health and life insurance policies, benefiting both policyholders and insurers.
Whatās Next?
The final decision will be taken at the GST Council meeting on December 21, 2024, with the government aiming to balance policyholder benefits and the broader economic impact.
