There may be good news for insurance buyers. Finance Minister Nirmala Sitharaman has indicated that the GST on insurance premium may be reduced. If this happens, it will be the biggest gift of the new year for insurance customers. Let us know in detail how this will affect your pocket and what changes it will bring for the insurance sector.
Current Status of GST on Insurance
- Term Insurance and Health Insurance premiums currently attract 18% GST.
- Traditional Life Insurance Policies are charged 4.5% GST on the first year’s premium and 2.25% GST thereafter.
- In the financial year 2023-24, the government earned GST revenue of ₹8,135 crore from Life Insurance and ₹8,263 crore from Health Insurance.
What can change?
- The GST Council constituted a Group of Ministers (GOM) in its meeting on 9 September 2024 to discuss issues related to GST on Life and Health Insurance.
- A proposal was presented to completely abolish GST on Term Life Insurance.
- It is being considered to remove GST on health insurance cover up to ₹ 5 lakh and insurance policies purchased by senior citizens.
- The GOM report will be discussed in the GST Council meeting to be held in Jaisalmer on 21 December 2024.
Possible benefits of GST reduction
Insurance premium will be cheaper
Reduction in GST rate will directly reduce the insurance premium. This will provide financial
Rlief to the policyholders.
The trend of buying insurance will increase
By buying cheaper insurance, more people will be able to avail the benefits of health and life insurance.
More cover, same expense
Existing customers will be able to buy bigger cover at a lower premium. For example, after the reduction of 18% GST, customers can choose more insurance cover in their old premium.
Senior Citizens will get special benefits
After Covid, the demand for insurance has increased rapidly among senior citizens. The number of people buying health insurance cover of ₹ 5 lakh increased from three lakh in 2019-20 to nine lakh in 2023-24. This number will increase further due to reduction in GST.
