Fitment Panel Submits Four Options for GST Relief; Decision Expected on Monday, September 9.
NEW DELHI E(conomy India): The GST Council is gearing up for a crucial meeting on Monday, September 9, where significant relief on Goods and Services Tax (GST) for health and life insurance premiums may be on the agenda. The Fitment Panel, a key advisory group comprising revenue officials from the central and state governments, has proposed four options for providing this relief. The move could lead to revenue losses ranging from ₹650 crore to ₹3,500 crore for the government, depending on which option is chosen.
Fitment Panel’s Recommendations: Four Options for GST Relief
The Fitment Panel has suggested four distinct options to the GST Council, which, if implemented, could significantly reduce the tax burden on policyholders:
- Full GST Exemption on All Health Insurance Premiums and Reinsurance:
This option could lead to a revenue loss of ₹3,495 crore annually. However, it would provide the maximum relief to consumers, especially in a post-pandemic era where health insurance has become more critical than ever. - Exemption on Premiums Paid by Senior Citizens or on Policies Up to ₹5 Lakh:
By targeting relief at senior citizens or policies with lower coverage, the government could minimize revenue loss to ₹2,110 crore. - Reduction in GST Rate from 18% to 5%:
A GST rate cut could offer widespread relief while capping revenue loss at ₹1,730 crore. - Targeted Exemption for Premiums Paid by Elderly Citizens:
This option, focused exclusively on premiums paid by senior citizens, would incur the least revenue loss, estimated at ₹645 crore.
Impact on Government Revenue
The government’s revenue from health insurance premiums is substantial. In the financial year 2023 alone, health insurance premiums amounted to ₹90,032 crore, contributing ₹6,354 crore in GST. If the GST Council opts for any of the proposed relief measures, the central and state governments could see a reduction in their annual tax revenue from health insurance, potentially affecting their fiscal plans.
States are particularly concerned, as they stand to lose half of the tax revenue from this sector. Some estimates suggest that states could face a combined annual revenue shortfall of ₹4,100 crore if these relief measures are implemented.
Consideration for Life Insurance Premiums
The panel also explored the possibility of exempting life insurance premiums from GST. This exemption, however, would apply only to individual life policies and reinsurance, with an estimated revenue loss of ₹213 crore. The panel has emphasized that any tax relief provided to insurance companies should be passed on to policyholders to ensure the intended benefit reaches the consumers.
Ministerial Advocacy and Policy Implications
Union Minister Nitin Gadkari has been a vocal advocate for reducing or eliminating the 18% GST on life and health insurance premiums. He recently penned a letter to Finance Minister Nirmala Sitharaman, urging her to consider the tax burden on policyholders.
Finance Minister Sitharaman has addressed concerns about potential conflicts between the central and state governments over GST revenue sharing. She assured that the government remains committed to equitable tax policies that support both fiscal stability and consumer welfare.
Looking Forward
The upcoming GST Council meeting will be crucial in determining the future tax landscape for the insurance sector in India. As stakeholders await the final decision, the government’s approach will be closely watched for its impact on consumers and state revenues alike.
Economy India
