GST Council to Discuss Lowering Rates on Health Insurance to 5%

According to a report by Business Today, the proposal will be discussed at the 55th GST Council meeting, set to take place on December 21, 2024, in Jaisalmer.

Medical Dialogues team had earlier reported that a Group of Ministers (GoM) was assigned to review the GST rates applicable to medical insurance. “There were a lot of discussions about whether we should reduce the rate or exempt it, whom should we exempt and whom should not, what happens to group insurance; are we going to carve out only for senior citizens, will this not complicate the implementation?” Finance Minister Nirmala Sitharaman had stated.

Also Read: GST Council sets up GoM to review 18 per cent GST on health, life insurance

Lately, the GoM has outlined several reforms to the current GST framework for insurance products, with a focus on making health and life insurance more affordable and accessible. Key recommendations include a flat 5% GST rate for all individual health insurance policies, with no provision for Input Tax Credit (ITC). Additionally, it has been suggested that GST exemptions be granted for pure term life insurance policies, particularly those providing family coverage, to further ease the financial burden on policyholders. Another critical proposal involves exempting health insurance policies for senior citizens from GST, ensuring that older individuals can access affordable healthcare protection.

Currently, health and life insurance premiums are taxed at 18%, making them expensive for many households. If these proposals are implemented, they could significantly lower the cost of premiums, encouraging wider adoption of health insurance among individuals and families.

For senior citizens, who often face higher insurance premiums due to age-related risks, the proposed GST exemption could be transformative. By reducing costs, the exemption addresses long-standing concerns about affordability and accessibility in the healthcare sector.

The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising members from all states and union territories, will deliberate on these recommendations during its upcoming meeting, reports Business Today.