GST Panel May Take Up Insurance Relief Plea

By: Admin
Date: August 13, 2024
Categories: GST Recent News
Reading Time: 4 Min

Overview

The GST Council is likely to consider reducing the GST rate on health and life insurance premiums in an upcoming meeting. The rate rationalization committee has proposed lowering the rate to 5% from the current 18%, which could significantly reduce premium costs for policyholders.

Key Points

  1. Proposed Rate Change: The recommendation suggests a uniform 5% GST rate on health and life insurance premiums, marking a decrease from the existing 18% rate introduced in 2017. This change, if implemented, would bring considerable relief to consumers.
  2. Revenue Concerns: However, the committee refrained from recommending the complete abolition of GST on insurance. They emphasized the potential negative impact on revenue for both the Centre and states, making a total elimination of the tax unfeasible.
  3. Current GST Impact: Since the implementation of the 18% GST rate, premium costs have notably increased, surpassing the previous 15% service tax. This hike has been a point of concern for many policyholders.
  4. Pressure for Change: Consequently, growing pressure from various stakeholders has led to serious discussions about revising the GST rate on insurance. The proposed changes reflect the need to address these concerns and provide relief.
  5. Revenue Distribution: Finance Minister Nirmala Sitharaman highlighted that nearly 74% of the GST collected from insurance premiums is allocated to states. Specifically, 50% of the GST revenue directly benefits states, while the remaining amount is shared between the Centre and states, with 41% of the Centre’s share also going to states.
  6. Parliamentary Recommendation: Moreover, a parliamentary committee led by Jayant Sinha has recommended rationalizing GST on insurance. They also suggested the issuance of ‘on-tap’ bonds by the RBI to meet the industry’s capital requirements.

Conclusion

In conclusion, the potential reduction in GST on insurance premiums could provide much-needed financial relief to policyholders. This move addresses long-standing concerns about high premium costs and may lead to positive economic outcomes.

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