goods and service tax

Government Review of GST on Health Insurance Premiums Explained

Government Review of GST on Health Insurance Premiums

The government is currently reviewing the Goods and Services Tax (GST) rates applicable to health insurance premiums. This issue was discussed during the 54th GST Council meeting, which took place on September 9, 2024. As a result of comprehensive discussions, the Council established a Group of Ministers (GoM), led by Bihar's Deputy Chief Minister, Sh. Samrat Chaudhary, with the purpose of evaluating GST-related matters related to health and life insurance policies.

Tasks of the Group of Ministers

The GoM's primary responsibility is to conduct a thorough review of concerns regarding GST rates and potential tax benefits. However, it has not yet provided its report to the GST Council. The reinstatement of anti-profiteering measures aimed at ensuring that tax benefits lead to lower health insurance premiums remains unresolved, primarily due to the lack of formal recommendations from the GST Council.

Unresolved Questions

Furthermore, inquiries regarding possible revenue losses to states from the reduction of GST on health insurance and strategies to mitigate those losses while concurrently ensuring consumer relief have been deemed premature at this point.

Role of the GST Council

As GST rates and exemptions are determined by the recommendations of the GST Council—an established constitutional body consisting of representatives from the Centre and State/Union Territories—any modifications to GST on health insurance would proceed based on the Council's recommendations. Until the GoM submits its findings and proposals, definitive steps or policies regarding GST on health insurance cannot be confirmed.

Lok Sabha Inquiry on GST and Health Insurance

Context of the Inquiry

On December 16, 2024, the Lok Sabha will address Unstarred Question No. 3247, submitted by Shri Ramasahayan Raghuram Reddy, to the Minister of Finance. The inquiry includes the following points:

  • Anti-profiteering Measures: Is there a plan to reinforce these measures to reflect tax benefits in reduced health insurance premiums?
  • Government's Revenue Loss Strategy: How does the government intend to deal with potential revenue losses for states from reductions in GST on health insurance?
  • Balancing Loss and Consumer Relief: What strategies are being considered to reconcile revenue loss with the need for consumer relief?

Official Government Response

In response to part (a) of the inquiry, the Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, stated:

  • The GST rates and exemptions are set based on the GST Council's recommendations.
  • The issue of GST on life and health insurance was discussed in the 54th GST Council meeting. Following this, the GoM on Life and Health Insurance was formed under Sh. Samrat Chaudhary's leadership.
  • The GoM has yet to deliver its report. Consequently, no specific comments can be made regarding tax benefits for health insurance policies until further recommendations are available.

The remaining parts of the inquiry concerning the revenue loss and measures to balance such a loss do not require a response at this stage due to the preceding information.

Conclusion

In summary, the ongoing examination of GST related to health insurance premiums is influenced by the ongoing discussions within the GST Council and the findings of the newly constituted GoM. The outcomes of this review will play a crucial role in determining future GST policies in this sector.