Senior citizens' health and term insurance might be exempted from GST, formal announcement likely soon
When paying premiums for term and health insurance, the GST (Goods and Services Tax) often adds to your burden. However, relief may be on the way soon. During a meeting of the Group of Ministers (GoM) on Saturday, a consensus was reached on this issue. It was decided that the tax on premiums for health and term insurance coverage of up to Rs 5 lakh will be completely removed. Discussions were also held about exempting health insurance premiums paid by senior citizens from taxes, though no final decision has been made yet. It is expected that this exemption will likely be extended to seniors. However, health insurance premiums for coverage exceeding Rs 5 lakh will continue to attract an 18% GST.
According to sources, the GoM members are broadly in favor of reducing insurance premium rates. After the meeting, GoM convener and Bihar Deputy Chief Minister Samrat Choudhary stated that discussions aimed at providing relief to people took place, with special attention given to senior citizens. The GoM will submit its report to the GST Council by the end of the month, where the final decision will be made.
It is worth noting that the council formed a 13-member ministerial group last month to review tax decisions related to life and health insurance premiums. Apart from Samrat Choudhary, ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana are part of this group.
Currently, a 50-year-old individual paying around Rs 27,500 for a health insurance policy with a coverage of Rs 5 lakh would save Rs 4,100 in GST once this new rule is implemented. This means they would only pay Rs 24,400 instead of Rs 27,500 when renewing their premium next year.
The news is significant for those with life insurance policies and senior citizens seeking health insurance coverage. According to an official familiar with the matter, there is a strong possibility of exempting GST from term life insurance premiums and health insurance premiums paid by senior citizens. However, a final decision will be made by the GST Council.
For premiums on health insurance coverage exceeding Rs 5 lakh, the 18% GST will continue as usual. Similarly, a rate of 18% GST is currently applied to premiums for term policies and family floater policies. Members of the GoM are widely in agreement on reducing rates on insurance premiums, but the GST Council will make the final decision. Samrat Choudhary added that special attention is being given to senior citizens, and there’s a possibility that premiums paid by them may not attract GST regardless of the coverage amount.
The GoM, formed last month by the GST Council, has been tasked with submitting a report on health and life insurance premiums by the end of October. Ministers from several states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, and others, are part of this group.