Policyholders Likely To Benefit As Government Considers GST Relief On Insurance

(MENAFN- KNN India) New Delhi, Aug 19 (KNN) The government's move to reduce or abolish the Goods and Services Tax (GST) on insurance premiums has triggered mixed reactions from policy-holders and insurers.

While consumers could see significant relief, insurance companies are worried about losing input tax credit (ITC), which may increase their operating costs.

Currently, an 18 per cent GST is levied on life, health and ULIP premiums. Industry experts argue that this acts as a barrier to wider insurance adoption.

Abolishing GST or reducing it to 5 per cent could make insurance more affordable and help improve penetration, which stood at just 3.7 per cent in FY24, according to IRDAI.

For policy-holders, the impact would be direct. A health insurance plan costing Rs 50,000 annually now requires an additional Rs 9,000 as GST.

Removing or lowering this tax would reduce the burden on families and make both life and health coverage more accessible, particularly for low- and middle-income households. Experts say this step aligns with the government's vision of“insurance for all by 2047.”

However, insurers highlight that a zero GST regime would block ITC claims, raising costs for the industry. Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), suggested that reducing GST to 5 per cent would strike a balance - easing costs for consumers while allowing companies to retain ITC benefits.

Industry officials also flagged the need to address rising medical inflation, now at 14 per cent, which continues to push up premiums. They argue that regulation of healthcare costs, alongside a GST cut, will provide long-term stability.

Overall, while a nil GST will help customers, many in the industry believe a calibrated reduction would be more sustainable, ensuring growth in insurance adoption without harming insurers' financial health.

(KNN Bureau)

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