Rs 9,000 savings on insurance: Seniors, middle-class likely to benefit as GST Council mulls tax cut
Senior citizens paying Rs 50,000 annually for health insurance currently shell out an additional Rs 9,000 solely in Goods and Services Tax (GST), thanks to the steep 18% rate on insurance premiums. That burden may finally ease. The upcoming GST Council meeting is expected to consider a long-pending proposal: reducing or even scrapping GST on life and health insurance premiums.
Relief on insurance premiums
The move could be a game-changer, especially for the elderly and those buying basic health plans. Medical inflation is currently around 14%. Cutting GST will ease pressure on household budgets and help expand insurance coverage, which remains worryingly low. With healthcare inflation touching double digits and insurance premiums rising by 20–25% in recent years, any reduction in tax will significantly lower costs for policyholders. For instance, a senior paying Rs 50,000 annually would see the total cost drop to Rs 41,000 if GST is removed — a meaningful Rs 9,000 in savings.
The 18% GST has been one of the biggest pain points for policyholders and insurers alike, especially in a country where less than 40% of people have health insurance and term life insurance penetration is below 4%. The proposed relief aims to encourage greater adoption by making insurance more affordable across income groups.
Upcoming GST meeting
The upcoming GST Council meeting is set to consider a significant reduction or complete abolition of the 18% Goods and Services Tax (GST) on health and life insurance premiums. This move, if implemented, could bring much-needed relief to senior citizens and middle-class policyholders, aligning with the government's objective to enhance insurance penetration across India. Rising healthcare costs make the current GST rate a significant burden for policyholders, particularly for those with limited incomes.
This change could decrease the government's revenue by an estimated Rs 2,600 crore annually, although it foresees compensating for this through adjustments in other GST slabs.
Industry experts anticipate that reducing the GST to between 5% and 12% could result in enhanced affordability and uptake of insurance policies, particularly among first-time buyers. "The government decision to cut GST on insurance premiums can be a game-changer for the industry and crores of Indians," said Manish Kumar Goyal, Managing Director and Chairman of Finkeda. He noted that lower premiums would encourage more individuals to purchase adequate coverage, supporting the government's vision of insurance for all by 2025.
