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The GST Council may exempt GST on term life and senior citizen health insurance premiums; Here’s how it will impact policyholders
GST (Image for representation: News18)
GST On Insurance: India is on the verge of a major change in the taxation of term life insurance premiums and health insurance premiums for senior citizens. The GST Council is considering exempting both categories from Goods and Services Tax. If approved, this move could save policyholders significant amounts and boost insurance adoption, especially among the elderly and middle-income groups.
Term Life and Senior Health Policies May Soon Be GST-Free
Currently, term life insurance premiums and all health insurance policies attract an 18% GST. However, a panel of ministers has proposed full exemption for:
- Term life insurance premiums for all policyholders, regardless of age
- Health insurance premiums for senior citizens (above 60 years), with no upper limit on the sum insured
Additionally, health insurance policies for others with coverage of up to Rs 5 lakh may also qualify for GST exemption. The plan is expected to be discussed at the next GST Council meeting.
The Cost Advantage
For instance, a senior citizen paying Rs 50,000 annually for health insurance currently bears an additional Rs 9,000 in GST. Removing this tax would bring down the cost significantly, making insurance more affordable.
The estimated annual revenue loss to the government is around Rs 2,600 crore—including Rs 2,400 crore from health insurance and Rs 200 crore from term life insurance. The Council may balance this through adjustments in other GST slabs.
Why Now?
Insurance premiums have been rising sharply—by 20–25% in some cases—while penetration remains low. Fewer than 40% of Indians have health insurance, and life insurance penetration is below 4%. Removing GST could make insurance more attractive, especially to senior citizens and those opting for low to mid-tier health policies.
The move is also supported by IRDAI, which has long advocated treating insurance as a public good.
Timeline
Although no implementation date has been announced yet, the Group of Ministers has submitted its report. The proposal will be tabled at the upcoming GST Council meeting, likely before the next Parliament session. If approved, the exemption could be notified and rolled out in the coming months.
What to Expect
The exemption would significantly cut costs for policyholders, making term life and senior health insurance more affordable. It is a long-awaited reform that could encourage higher insurance penetration and offer relief to India’s growing elderly population.
FAQs
1. Will all term life insurance be exempt from GST?
Yes. The proposal covers all term life insurance policies, regardless of age or coverage.
2. Is the health insurance GST exemption limited to senior citizens?
Yes, the full exemption applies only to senior citizens. For others, policies with coverage up to Rs 5 lakh may be exempt. Policies with higher coverage will continue to attract GST.
3. How much will policyholders save?
Removing 18% GST from a Rs 30,000 health premium saves Rs 5,400. For higher premiums, the savings will be even greater.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
Read More