GoM Favors Scrapping GST on Health Insurance Premiums

The proposal will now go to the GST Council which is expected to take up the issue in its meeting in the first week of September.

A Group of Ministers (GoM) on Wednesday deliberated on the Center’s proposal to scrap Goods and Services Tax (GST) on health and life insurance premiums for individuals, currently taxed at 18%.

Convenor of the panel and Bihar Deputy Chief Minister Samrat Choudhary said after the meeting that most members supported making the levy nil.

“All members agreed with the proposal, but some states gave a (differing) view. We want GST on insurance to be zero. The proposal will now go to the GST Council,” Choudhary said. He added that the Council is expected to take up the issue in its meeting in the first week of September.

Union Finance Minister Nirmala Sitharaman addressed the GoM, outlining the Center’s plan to usher in next-generation GST reforms. A post by the Ministry of Finance on X said the proposal is part of efforts to rationalise GST rates and strengthen India’s progress towards Atmanirbhar Bharat.

Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka said, “Serious deliberations have taken place on life insurance and health insurance (for individuals) also. We all welcomed it and in fact from the state of Telangana we wanted that insurance GST to be brought down to zero.”

However, he stressed that “the premium from whatever GST are reducing, has to go down for policyholders, not to the companies. Some mechanism you have to evolve to see to it that whatever we are trying to do should go to the people.”

Officials estimate that exempting health and life insurance could lead to an annual revenue loss of around Rs 9,700 crore. Smaller states may face a loss of Rs 475-500 crore, according to a senior official.

A separate GoM, chaired by Minister of State for Finance Pankaj Chaudhary, also met Wednesday to discuss compensation cess, which will end on October 30.

Punjab Finance Minister Harpal Singh Cheema noted that “Punjab is losing Rs 21,000 crore every year post GST roll out,” adding that no alternative mechanism has been proposed so far to replace the cess.

Rajasthan Health Minister Gajendra Singh said discussions on broader GST rate rationalisation will continue Thursday. “The debate is going on. Overall there will be GST reduction. It will result in savings for the public and companies. The moment you save money, you are going to invest it somewhere, it’s going to have a multiplier effect,” he said.

While states welcomed the move to make insurance more affordable, concerns remain about revenue loss and ensuring that benefits of the exemption reach policyholders.

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