The GST rate on premiums for health and life insurance could be lowered in a move to relieve the millions of policyholders in India. The matter has been referred to a panel on GST rate rationalization, which is expected to study the existing tax rates and recommend changes that would make insurance more affordable to consumers.
Current Position
Currently, the goods and services tax (GST) on health and life insurance premiums in India stands at 18%, which many consider as high, especially for basic services such as these. The cost of insurance, particularly health insurance, has increased due to inflationary pressures in medical expenses and consumer awareness. However, the high percentage of GST is considered burdensome by people with policies.
Rate Equalisation Urgency
Insurance plays a vital role in ensuring financial security and risk management for individuals as well as their families. Given COVID-19-related threats among others, more attention is now paid to healthcare hence the growing demand for health coverage. Likewise, life cover acts as protection against coming uncertainties one’s dependants may face. With this regard, there have been calls across the board asking for a reduction of GST levied upon them so that they become accessible.
In recognition of these issues, it has directed the rate rationalization panel to look into the current taxation structure regarding premium collections from insurers. Its duty will be examining possibilities of reducing these rates lower thereby making subscription easier while helping meet an even greater population through coverages, especially India’s still uninsured masses.
Policy Implications
Reducing GST rates on health and life insurance premiums would lead to several positive outcomes:
More Affordable: This would reduce the cost of premiums directly through lower GST rates enabling more people within society to afford them.Thus,demand for both health &life insurance policies might grow boosting penetration levels throughout the nation.
Increased Coverage: Policyholders could choose higher coverage plans or additional benefits when they are paying low premiums. This could result in increased protection and financial security for policyholders.
Conclusion
A welcome development that could bring substantial benefits to consumers and the insurance industry alike is the potential reduction in GST on health and life insurance premiums. The government, by making insurance affordable, can enhance financial security for millions of Indians as well as drive growth in the insurance sector. Hence, the outcome of rate rationalization panel’s review will be eagerly awaited with anticipation for a more equitable and inclusive tax structure for essential insurance services.
