GST Council meeting: A big decision has been taken in the GST Council meeting. In which ministers proposed to reduce GST on health and life insurance premiums. Now it has been postponed till the next meeting of the GST Council. Therefore, people will still have to pay the insurance premium as per the old tax rate.
Reason given for postponing the decision to reduce premium
The decision to reduce premium on health and life insurance premiums was postponed in the 55th meeting of the GST Council citing need for further clarification. It has also asked for additional information to be submitted to make its report more comprehensive.
What is the current GST rate?
Currently, health insurance, term life insurance and unit-linked insurance plans come under the 18% GST rate. GST application varies across endowment plans, with a rate of 4.5% in the first year and 2.25% from the second year onwards. For life insurance, single premium annuity policies attract a GST rate of 1.8%. This rate applies equally to all age groups. The Group of Ministers (GoM) on health insurance submitted its recommendations to revenue officials of state and central governments on December 16.
What were the recommendations?
-Exemption for health insurance: GoM proposed GST exemption for pure term life insurance policies covering family members. This will mean that these policies will not be subject to GST, reducing the financial burden on policyholders.
– Exemption on health insurance for senior citizens: Another key recommendation is exemption from GST on health insurance policies specifically for senior citizens, which will help make healthcare more affordable for senior citizens.
– Reduction in GST rate on individual health insurance: The GoM has also proposed to reduce the GST rate on all individual health insurance policies to 5% without the option of input tax credit (ITC). It aims to reduce the cost of health insurance premiums for individuals by simplifying the process.
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