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Informist, Saturday, Oct. 19, 2024

--Tamil Nadu Minister: States sought GST exemption on life insurance premium 
--Tamil Nadu Minister: States sought GST exemption on health insurance premium 
--Tamil Nadu Minister: GoM yet to decide on life, health insurance premium GST 
--Tamil Nadu Minister: Pitched for GST exemption on life insurance premium 

 

NEW DELHI - The Group of Ministers to decide goods and services tax on life and health insurance premium is likely to propose total exemption of the tax, a senior official, who was part of the meeting, said Saturday. The panel will place the proposal before the GST Council which will next meet in November.

Currently, the GST on health and life insurance premiums is 18%.

While majority states batted for exemption of GST on life and health insurance premiums, Tamil Nadu Finance Minister Thangam Thenarasu said that he pitched for lowering GST on health insurance to 5% without the benefit of input tax credit. At the time when Thenarasu spoke to the media, he had said that the panel was still discussing the issue and was yet to take a final call.

According to Saloni Roy, a tax partner at Deloitte India, if the GST rate on health or life insurance is reduced from 18% to 5% without the benefit of input tax credit, it could result in building up of input tax credit at insurers' end. This, Roy said, "may not help the ultimate customers in terms of a substantial price cut".

 

It is to be noted that there was always a consensus even at the GST Council to lower the GST on premiums; however, there were some technicalities that deterred the council from taking a call in the last meeting. Informist had earlier reported, citing a senior finance ministry official, that there have been occasions in the past when cuts in tax rates announced by the GST Council have not been passed on to the consumers of those goods and services. Instead, companies increased their profit margins.

 

In November 2017, after the council reduced GST rates on restaurants to 5% from 18% and 12%, anti-profiteering investigations were initiated against some of them for allegedly not passing on the benefit of reduced taxes to customers.

 

Though insurance products are homogenous, companies perform their own underwriting and product design, with pricing done accordingly. As such, even if GST rates are cut, companies can tweak the base price of insurance policies so that the ultimate cost for policyholders is unchanged. On top of that, no new GST anti-profiteering cases will be accepted from 2025-26 (Apr-Mar).

 

In its last meeting on Sept. 9, the GST Council had announced forming a 13-member Group of Ministers to look into the possibility of cutting the tax rate on life and health insurance premiums from the current 18?ter demands from various quarters that these premiums should not attract any tax. 

 

The Group of Ministers is headed by Bihar Deputy Chief Minister Samrat Choudhary, and includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. 

 

Though insurance products are homogenous, companies perform their own underwriting and product design, with pricing done accordingly. As such, even if GST rates are cut, companies can tweak the base price of insurance policies so that the ultimate cost for policyholders is unchanged.

 

The issue of withdrawal of the 18% GST on health insurance premiums had become a bone of contention for the Council as it saw multiple rounds of protests and debates during the Monsoon Session of Parliament. This issue came to the fore after a letter to Finance Minister Nirmala Sitharaman from Road Transport and Highways Minister Nitin Gadkari was leaked into the public domain that sought withdrawal of GST on insurance premiums. Gadkari wrote that the levy amounts to taxing the uncertainties of life and restricts growth of the sector.

 

Replying to the protests, Sitharaman had suggested the Opposition bring the proposal to the GST Council through state finance ministers. She slammed the Opposition for politicising the issue in Parliament and asked if the members had written to the finance ministers of Opposition-ruled states to withdraw the tax. Sitharaman had also said that the matter was discussed thrice in the GST Council meeting. The council discussed the matter at its 31st meeting, 37th meeting, and 47th meeting.  End

 

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

 

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