DFS, GIC and LIC pitches for GST rate rejig on insurance premia but with ITC
As the Group of Ministers (GoM) get ready for another round of discussions, three key stakeholders, Financial Services Department, GIC and LIC support lowering GST on insurance premia but with input tax credit (ITC).
The GST Council, in its meeting on December 21 deliberated on the GoM report, but suggested further discussions. After the meeting, Bihar’s Deputy Chief Minister Samrat Chaudhary, who also leads the Group of Ministers (GoM) on insurance, said: “For the report which was to be given by the GST GoM, many ministers were of the view that one more meeting should happen. Whether it is for group insurance, individual insurance or senior citizens’ insurance, we will do another meeting for it. We will discuss it all in the next meeting.” Further, he added that said next meeting will take place in January before the proposal is reintroduced to the Council.
According to sources, GoM received references from various stakeholders. Financial Services Department made a case for cutting GST on individual health insurance and individual term life insurance premia to 5 per cent with input tax credit (ITC). General Insurance Corporation suggested cutting GST on health insurance premia to 12 per cent with ITC. In its submission, LIC did not mention any specific rate, though it said “ITC should be available if GST on term life insurance is rationalised.”
The significance of ITC could be understood by its share in total GST revenue. In 2022-23, health insurance fetched revenue over Rs.16000 crore, out of which nearly 55 per cent was paid in cash and the remaining in ITC. In the same year, life insurance policies gave over Rs.21,000 crore as GST, out of which 42 per cent was paid in cash and 58 per cent in ITC. Simply speaking, ITC helped the insurance companies to lower its cash outgo for tax payment, which in turn helps the balance sheet. This could be the reason for stakeholders advocating for lower GST with ITC.
