The Impact of Proposed GST Relief on Insurance Premiums
Expected Revenue Loss
GST relief – According to sources in the GST Council, the proposed GST relief on term life and health insurance premiums could result in an annual revenue loss of around Rs 2,600 crore.
Exemptions Discussed
On December 21, the Council will discuss exemptions for term life insurance premiums covering family members and health insurance premiums for senior citizens, regardless of coverage amount. Additionally, health insurance policies offering coverage up to Rs 5 lakh may also receive GST exemption.
Revenue Impact
Sources mentioned to Moneycontrol that the revenue loss from exempting term life insurance premiums from GST is estimated at Rs 200 crore annually. For health insurance premiums, the revenue impact is expected to be around Rs 2,400 crore per year.
Consumer Benefit
If the GST relief leads to cheaper insurance policies for consumers, it is anticipated that the number of insurance policies sold will increase, offsetting the revenue loss. There could be an increase in insurance consumption by more than 18 percent due to the demand elasticity in this sector.
Group of Ministers (GoM)
The GoM on real estate taxation has not reached a consensus and will not be presenting its report at the upcoming meeting on December 21. The group has not submitted any final or interim report yet.
GoM on Cess
The GST Council is likely to grant a six-month extension to the GoM on Cess, chaired by Minister of State for Finance Pankaj Chaudhary. The GoM is responsible for exploring taxation mechanisms for luxury and demerit goods after the abolition of GST compensation cess in March 2026.
IGST Report
The report on IGST settlement, which has been finalized, will also be a key agenda item for the December 21 meeting. It aims to address the negative balance in IGST and propose measures to recover excess IGST disbursed to states.
The committee, chaired by the Additional Secretary of Revenue, includes officers from both state and central governments. It was established to tackle systemic issues in IGST disbursement and ensure fair distribution among states.
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