Insurance Companies Seek Reduction in GST Rates on Life and Health Insurance: Will the Government Act?

Insurance companies have made a significant move by knocking on the doors of the GST Council, seeking a reduction in GST rates on Life insurance and health insurance products. The companies have submitted a detailed representation to the government, requesting a phased reduction in levies to make insurance more affordable for the common man.

Currently, Life insurance products are taxed at 18% under the GST regime, which the insurers are proposing to bring down to 12%. They argue that the high rates are discouraging people from opting for Life insurance and are pushing them towards other alternatives. The insurers believe that reducing the GST rates will not only make Life insurance more accessible but also align with the government’s goal of promoting inclusive growth and ensuring a well-insured society.

Following the reduction in GST rates on Life insurance, the insurers are also seeking a similar cut in health insurance products, from 18% to 12%. They emphasize that making health insurance more affordable is crucial for ensuring better healthcare access for all individuals.

In addition to the rate reduction, insurance companies are also seeking clarity on the applicability of GST to co-insurance. They are requesting the council to consider removing GST on outsourcing or sharing the insurance burden between companies under sub-contracting arrangements.

Experts believe that reducing GST rates on insurance products will support the government’s vision of increasing insurance coverage in the country. It will encourage more individuals to secure their future against life and health risks, ultimately leading to a more financially secure population.

The issue of co-insurance and re-insurance has also come under scrutiny, with the Directorate General of GST Intelligence (DGGI) raising concerns about the tax implications of these practices. Insurance companies argue that the discounts given in reinsurance contracts do not constitute a taxable service and should not be subject to GST.

Abhishek A Rastogi, founder of Rastogi Chambers, suggests that a rationalization of GST rates for insurance products would be a more practical solution than a straight reduction from 18% to 12%. He highlights the need for insurance companies to pass on any benefits of reduced tax rates to customers and warns against potential anti-profiteering provisions if this is not done.

Overall, the proposal for reducing GST rates on insurance products is expected to be taken up by the GST Council for deliberation once the new government assumes office. It remains to be seen how the council will address the concerns raised by insurance companies and ensure a more conducive environment for the growth of the insurance sector in India.