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Informist, Friday, Nov. 29, 2024

 

NEW DELHI – The GST Council at its upcoming meeting on Dec. 21 may decide on exempting the 18% goods and services tax levied on premiums paid for all life insurance policies, and on premiums paid for health insurance products providing a coverage of up to INR 500,000, a senior finance ministry official said. The Group of Ministers which will decide on exempting GST on life and health insurance premiums had last met on Oct. 19. During this meeting, it had recommended a complete exemption from the indirect tax. 

 

"A blanket relief for all health insurance premiums may not be provided," the official told Informist Thursday. However, the Council may decide to lower the 18% GST on health insurance premiums for coverage exceeding INR 500,000 to 12% or 5%. "That call will be taken by the Council," the official said. 

 

It is to be noted that there was always a consensus at the GST Council to lower the tax on insurance premiums; however, the Council refrained from taking a call on this at its last meeting due to some technicalities. 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 used the reduced taxes to increase 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 borne by policyholders remains unchanged. On top of that, no new GST anti-profiteering cases will be accepted from 2025-26 (Apr-Mar).

 

At 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. 

 

The issue of withdrawal of the 18% GST on health insurance premiums had become a bone of contention for the Council after the matter led to several 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 seeking 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 in Parliament, Sitharaman had suggested the Opposition bring the proposal to the GST Council through state finance ministers. She even slammed the Opposition for politicising the issue 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 previous GST Council meetings. The matter was discussed at the Council's 31st, 37th, and 47th meeting.  End

 

Reported by Priyasmita Dutta

Edited by Tanima Banerjee

 

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