Union Finance Minister Nirmala Sitharaman on Monday said the cost of insurance to the policy holder is expected to come down if the GST Council recommends a reduction in GST rate on health and life insurance policies.
The minister, in a written reply in the Lok Sabha, said the GST Council in its September 9 meeting had recommended to constitute a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on life insurance and health insurance.
She said that the matter of review of GST rates on life and health insurance is pending before the GoM.
“If a recommendation for a reduction in GST rate is made by the GST Council, the cost of insurance to the policy holder is expected to come down on account of reduction in GST,” she added.
Currently, a GST rate of 18% is applied on premiums for life and health insurance policies.
In the 2023-24 fiscal, the Centre and state governments had collected Rs 16,398 crore GST from healthcare and life insurance policies. This included Rs 8,135 crore from life insurance and Rs 8,263 crore from health insurance.
The Finance Minister was replying to the question on whether GST reduction on health insurance will be a step towards making healthcare more equitable.
To a query on how the government will ensure that insurance companies pass on the benefits of any GST reduction to consumers, rather than retaining them through increased premiums, Sitharaman said competitive pricing would bring down the cost of insurance.
“As the GST rates are applicable over and above the insurance premium, if the GST rate is reduced, it is expected to benefit the policyholder directly especially in a competitive market with many insurers as the cost of insurance will reduce to that extent,” she said.
The GST Council is slated to meet on December 21 in Jaisalmer where it is expected to take up the issue of GST on life and health insurance.