GST on insurance premium: Council could meet in September to debate. Details here

A few days after Finance Minister Nirmala Sitharaman said that the debate around GST on insurance premium will be taken up by the GST Council, the body is likely to meet next month to discuss the issue, reported Business Line.

It is worth recalling that Union Minister of Road, Transport and Highways Nitin Gadkari had urged her to remove the 18 per cent GST on life and medical insurance premiums as it leads to levying taxes on the uncertainties of life and restricts the sector’s growth.

Based on representations from a number of quarters, these committees will prepare the groundwork for various proposals, which will then be presented before the Council.

The body will give its recommendations to be implemented by the Centre, the States and the Union Territories.

Although the meeting's agenda is yet to be finalised, some issues are certain to be taken up including GST on insurance premium, which has become a political issue.

The matter was raised by the Opposition during the debate on Budget 2024. Responding to the same, Sitharaman said that even before GST was rolled out, the States levied tax on insurance premia.

Allocation of insurance premium

“Out of the 18 per cent GST on medical insurance, nearly half goes directly to the States. Of the remaining half, 41 per cent moves into the devolution pool, which also goes to States. This means more than ₹74 out of every ₹100 collected goes to the States,” she said, dismissing allegations that money collected through GST is “pocketed” by the Centre.

The issue of GST on insurance, Sitharaman added, has been discussed thrice by the GST Council, yet this debate keeps resurfacing.

Another key agenda that could be discussed is rate rationalisation. At the end of the last Council meeting in June, Sitharaman had said that the Group of Ministers (GoM) will present a status report on rate rationalisation discussed till date.

Accordingly, the Council will take it forward. However, the process to finalise the rate rejig will take time, she indicated.

The seven-member panel has been tasked with suggesting rate rationalisation and correcting the inverted duty structure so as to simplify the rate structure, review the GST exemption list and enhance revenues collected from the Goods and Services Tax.