Have high hopes from GST cut on health, life insurance? Here's why a drastic fall is unlikely to benefit policyholders
GST rate of 18% on life and health insurance policies. After union minister Nitin Gadkari raised this issue, the people started hoping for the rate cut to become a reality as it was taken for consideration by the GST council. However, despite several meetings in the past the GST council is yet to take a final call on this issue. The issue is likely to be taken up again in the next GST council meeting on December 21. However, the question remains how likely a reduction is and whether it will really benefit the policyholders.
Government gets a significant revenue from GST on insurance policies. The government has answered in Lok Sabha that more than Rs 16,000 crores was collected by levying Goods and Services Tax (GST) on health and life insurance policies issued through FY 2023-24. It will not be an easy decision to forego such a big source of revenue. Considering this new information and also the public demand for lower GST rates on health and life insurance, a significant rate cut appears a challenging task for government.
Moreover, insurance companies are facing a challenge if such a reduction will actually help them in lowering their costs. They want assurances from the government that if the GST rate is lowered, the companies would still be able to claim input tax credit on the insurance policies sold. If the government does not assure this then it will add a cost component for them which is going to increase insurance premiums instead of decreasing.
Read below to find out possible solutions to these
