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GST Council Defers Decision on Life and Health Insurance Premium Rates
December 21, 2024 @ 11:00 am - 6:00 pm
The GST Council, the governing body for India’s Goods and Services Tax, met for its 55th meeting in Jaisalmer on December 21st, 2024. Chaired by Union Finance Minister Nirmala Sitharaman, the Council addressed a range of key issues, including potential tax changes for insurance premiums. However, a final decision on this matter has been deferred.
Insurance Premium Tax Relief on Hold
A key agenda item was the long-standing demand from the insurance industry to reduce or exempt GST on life and health insurance premiums. This move is seen as crucial to alleviate the tax burden on both insurers and policyholders.
A Group of Ministers (GoM), headed by Bihar Deputy Chief Minister Samrat Chaudhary, had been deliberating on this issue. The GoM largely favored a full exemption on health and life insurance premiums, while some members proposed a reduced GST rate of 5% (down from the current 18%).
However, the GST Council ultimately decided to defer the decision, citing the need for further discussion and clarification on certain technical aspects. The GoM is scheduled to reconvene in January to continue deliberations.
Key Recommendations and Considerations
The GoM’s recommendations include:
- Full GST exemption on premiums for term life insurance policies.
- Full GST exemption on health insurance premiums paid by senior citizens.
- GST exemption for non-senior citizens on health insurance premiums for policies with coverage up to Rs 5 lakh. Policies exceeding this limit would remain subject to the 18% GST rate.
The GST Council will further examine these recommendations in its next meeting.
Other Important Updates
In addition to insurance premiums, the GST Council addressed other significant issues:
- GST Compensation Cess: The GoM on GST compensation cess is expected to receive a six-month extension, pushing the report deadline to June 2025.
- Food Delivery Platforms: The Council is deliberating on whether to apply the 5% GST on delivery charges by food delivery platforms retroactively from 2022.
- Aviation Turbine Fuel: The inclusion of aviation turbine fuel under GST is also under consideration.
Implications and Future Outlook
The deferral of the decision on insurance premiums highlights the complexities involved in balancing revenue considerations with the need to provide relief to taxpayers. The GST Council’s continued focus on streamlining GST processes and addressing industry concerns is crucial for the ongoing success of this landmark tax reform in India.
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