December 21, 2024: The Goods and Services Tax (GST) Council, in its 55th meeting held on Saturday, deferred a key decision on the proposed reduction of tax rates on life and health insurance premiums. The decision, which has been a long-standing demand from the insurance industry, was postponed as the Council indicated that further deliberations were needed to address certain technicalities.

Chaired by Union Finance Minister Nirmala Sitharaman, the GST Council met in Jaisalmer to discuss a range of issues, with health and life insurance premiums being one of the focal points. A major proposal put forward by the Group of Ministers (GoM), led by Bihar Deputy Chief Minister Samrat Chaudhary, suggested a complete exemption from GST on premiums for health and life insurance policies. However, some members of the GoM recommended reducing the current 18% GST rate to 5% instead of a full exemption.

“There were diverse opinions, and it was felt that more discussions were needed. The GoM will reconvene in January to continue these talks,” said Chaudhary after the meeting.

Among the recommendations was a proposal to exempt GST on premiums paid for term life insurance policies. Additionally, the GoM suggested granting an exemption for health insurance premiums paid by senior citizens. For individuals under the age of 60, it was proposed that premiums for health policies up to ₹5 lakh be exempted from GST. However, premiums for policies exceeding ₹5 lakh would continue to be subject to the 18% tax rate.

The GST Council will resume discussions on these proposals in the upcoming meeting, with members agreeing that more technical details need to be worked out.

In other developments, the GoM on GST compensation cess is expected to receive a six-month extension until June 2025 to submit its report. The GST Council also addressed the issue of applying the 5% GST on delivery charges by food delivery platforms, with discussions on whether the tax would be applied retrospectively from 2022. Currently, food delivery companies do not pay GST on delivery charges. Additionally, there are plans to deliberate on the potential inclusion of aviation turbine fuel under the GST regime.

The deferral of the insurance premium tax decision leaves the industry awaiting a resolution, as insurers and policyholders had hoped that the changes would ease the tax burden and bring much-needed relief to the sector.