GST Relief for Individuals and Senior Citizens on Health Insurance Premiums? Key Decision Expected Today

The 54th GST Council Meeting, set to take place today, brings with it the possibility of crucial changes, particularly for individuals and senior citizens seeking relief on health insurance premiums. With health insurance becoming a necessity rather than a luxury, the current 18% GST rate on health premiums adds a significant financial burden on policyholders. The Council, led by Finance Minister Nirmala Sitharaman, may provide some much-needed relief, as they discuss a potential reduction in the GST on health insurance.

Potential Reduction in GST on Health Insurance Premiums

At present, health insurance premiums attract an 18% GST across the board. This includes both individual and group policies, making health coverage more expensive, especially for senior citizens who are already paying higher premiums due to age-related risks. According to sources, today’s discussions could lead to a decision that lowers this GST rate, offering relief to individuals and senior citizens alike.

The Fitment Committee, which is responsible for reviewing GST proposals, has already reviewed this suggestion. Their findings, along with the estimated impact on revenue, will be presented at the meeting. While a complete exemption from GST on health insurance is also on the table, it seems likely that the 18% GST on group health policies will remain unchanged. However, a reduced GST rate on individual health insurance premiums would ease the financial pressure on policyholders.

Impact of Lower GST on Health Insurance Premiums

A lower GST rate on health insurance premiums would be a welcome move for many. Currently, the 18% GST on health insurance adds to the overall cost of premiums, which can already be substantial, particularly for senior citizens or those with pre-existing health conditions. A reduced GST rate would not only make health insurance more affordable but could also encourage more individuals to opt for coverage, increasing the overall insurance penetration in the country.

Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co., highlighted the importance of reducing the GST burden on health insurance premiums. He noted, “India, despite being the world’s most populous country, ranks low in terms of life and health insurance coverage. A reduction in GST could significantly improve affordability and encourage more individuals to invest in health insurance.”

GST on Life Insurance Policies

The GST Council’s discussions are not limited to health insurance premiums. Life insurance premiums are also subject to GST, albeit with a more nuanced structure. Term insurance, considered one of the most affordable types of life insurance, incurs an 18% GST on the premium. This applies to the total premium paid, including additional riders such as critical illness and accident covers.

Traditional life insurance policies have a tiered GST structure. In the first year, the premium attracts a 4.5% GST, while subsequent years see a lower rate of 2.25%. This structure is designed to reflect the mix of risk and investment elements in these policies. Unit Linked Insurance Plans (ULIPs), on the other hand, are taxed differently. The 18% GST is only levied on the mortality and charges component of ULIPs, not on the investment portion. This ensures that the tax burden is minimized on the savings part of the policy.

Proposed Changes in GST on Digital Payments

Another key issue up for discussion at the 54th GST Council Meeting is the taxation of online payments. Currently, payments made through payment gateways such as debit and credit cards are not taxed if they are below ₹2,000. However, reports suggest that the Council may introduce an 18% GST on such transactions.

This proposal, if implemented, could have far-reaching implications for consumers and businesses alike. For individuals who frequently make small digital transactions, this could result in additional costs, making digital payments less appealing. Businesses that rely on payment aggregators could also face higher transaction fees, which may be passed on to customers.

GST Revenue from Online Gaming Post-28% Tax Implementation

The GST Council will also review the impact of the 28% GST on online gaming. This tax, which applies to entry-level bets, was introduced to combat tax evasion by offshore gaming platforms. These platforms are now required to register and pay taxes in India, increasing the compliance burden.

While the 28% GST rate remains in place, today’s discussions will focus on how effectively this regime has worked in increasing tax revenues. The revenue generated from online gaming could provide insights into whether further adjustments are necessary to curb tax evasion and streamline tax collection from this sector.

Fake GST Registrations Crackdown

In addition to rate discussions, the Council will review the ongoing crackdown on fake GST registrations. Launched in August 2024, this initiative aims to identify and eliminate non-existent GSTINs. Early reports suggest that this effort has uncovered tax evasion worth ₹24,010 crore, indicating the severity of the problem.

The GST Council will assess the progress of this initiative and discuss steps to enhance the crackdown’s effectiveness. The crackdown’s success in curbing fake registrations could lead to a cleaner, more efficient GST system.

Key Expectations from the 54th GST Council Meeting

The 54th GST Council Meeting is expected to address several critical issues:

• Reduction in GST rates on health and life insurance premiums: A lower GST rate could make insurance more affordable, especially for senior citizens and individuals. Industry experts are hopeful that this change could boost insurance penetration across the country.
• Review of GST on digital payments: The introduction of an 18% GST on payments below ₹2,000 could impact small transactions and discourage digital payments.
• Online gaming taxation: The Council will review the 28% GST implementation and its effect on tax revenues.
• Crackdown on fake GST registrations: Progress on this initiative will be reviewed, with further steps likely to be discussed.

Notifications and Amendments

Finally, the Council is expected to approve several notifications and amendments from previous meetings. These include changes to GST law introduced in the Finance Act 2024, such as waivers on interest and penalties for demand notices, and adjustments to the GST Appellate Tribunal‘s appeal limits. These amendments aim to streamline GST processes and improve dispute resolution mechanisms.

In conclusion, today’s GST Council meeting could bring about significant changes in the taxation of health and life insurance premiums, online payments, and digital transactions. The discussions and potential outcomes will be closely watched by both businesses and consumers alike.

Potential GST Reduction on Health Insurance Premiums

Currently, health insurance premiums are taxed at 18% GST, adding a significant cost to policyholders, especially senior citizens. The potential reduction in this tax rate could provide much-needed financial relief to those purchasing health insurance. The Fitment Committee has already reviewed the proposal, and their findings will be presented at the meeting.

If approved, this move could lead to lower insurance costs, promoting better health insurance penetration across India, especially among the elderly who face high premium rates due to age-related risks.

Impact of a Lower GST Rate on Health Insurance

Lowering the GST on health insurance premiums would have a positive financial impact on individuals and senior citizens. Reducing the 18% GST would make policies more affordable and may encourage more people to buy health coverage, ensuring better financial security in case of medical emergencies.

According to industry expert Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co., “India ranks low in insurance coverage per capita despite its large population. Lowering the GST on health insurance premiums would make insurance more accessible, benefiting both individuals and the economy.”

GST on Life Insurance Policies

In addition to health insurance, the GST Council will also discuss the taxation of life insurance policies. Here is how the GST is currently applied to different types of life insurance:

• Term Insurance: Attracts an 18% GST on the entire premium, including any additional riders like critical illness and personal accident coverage.
• Traditional Life Insurance Policies: Follow a tiered GST structure—4.5% GST in the first year and 2.25% GST in subsequent years.
• Unit Linked Insurance Plans (ULIPs): GST is applied at 18% on the mortality and charges component, but not on the investment portion.

Understanding how GST affects life insurance premiums can help policyholders make informed financial decisions and take advantage of tax deductions under Section 80C and 80D.

Imposing GST on Digital Transactions Above ₹2,000

Another significant item on the agenda is the proposal to impose 18% GST on small digital transactions above ₹2,000, which are currently untaxed if made through payment gateways. If the Council approves this, it could increase the cost of using credit or debit cards for transactions and may affect consumers’ payment preferences.

GST Revenue from Online Gaming After 28% Tax Implementation

The GST Council will also review the revenue impact of the 28% GST imposed on online gaming. Introduced to curb tax evasion by offshore gaming platforms, this tax is applied to entry-level bets. The Council will assess whether this taxation policy has been successful in boosting GST revenue and consider whether further reforms are necessary.

Ongoing Crackdown on Fake GST Registrations

The government’s crackdown on fake GST registrations has already revealed tax evasion worth over ₹24,010 crore. The Council will evaluate the progress of this initiative, ensuring that non-existent GSTINs are rooted out to curb fraud and improve tax compliance.

Notifications and Amendments Expected from the GST Council

The meeting will also likely see the approval of several notifications and amendments related to GST laws, including the introduction of waivers on interest and penalties for demand notices and adjustments to the GST Appellate Tribunal.

Key Outcomes Expected from the 54th GST Council Meeting

• GST Rate Reduction on Health and Life Insurance: A potential decrease or exemption in GST on health and life insurance premiums could ease financial pressures and improve insurance penetration across India.
• Tax on Digital Payments Above ₹2,000: The introduction of an 18% GST on smaller digital transactions may change consumer behavior and increase transaction costs.
• Review of 28% GST on Online Gaming: The Council will assess whether the increased tax on online gaming has helped curb tax evasion and increased revenues.
• Continued Crackdown on Fake Registrations: The drive to identify fake GST registrations will continue to be a focal point, ensuring that tax fraud is minimized.

FAQs on GST and Insurance Premiums

Q1: What is the current GST rate on health insurance premiums?

The current GST rate on health insurance premiums is 18%. However, the 54th GST Council Meeting may reduce this rate to provide financial relief, particularly for senior citizens.

Q2: How much GST is charged on life insurance policies?

• Term Insurance: Attracts an 18% GST on the entire premium.
• Traditional Policies: Attract 4.5% GST in the first year and 2.25% GST in subsequent years.
• ULIPs: Attract 18% GST only on the mortality and charges component, not on the investment portion.

Q3: Is there a possibility of GST being imposed on digital transactions?

Yes, the GST Council is discussing the possibility of imposing an 18% GST on digital transactions above ₹2,000, which are currently untaxed.

Q4: How will the proposed GST changes impact insurance policyholders?

If the GST on health and life insurance premiums is reduced, policyholders will experience lower costs, making insurance more affordable and increasing coverage in the population.

Q5: What impact has the 28% GST had on online gaming revenues?

The Council will review how the 28% GST on online gaming has affected tax revenues and whether it has effectively addressed tax evasion by offshore gaming platforms.

Q6: What are the expected notifications and amendments to GST law?

The GST Council may approve several amendments, including waivers on penalties for demand notices and adjustments to the GST Appellate Tribunal, aimed at streamlining the GST system.

Conclusion

The 54th GST Council Meeting is expected to bring key decisions that could have a significant impact on insurance premiums, digital payments, and online gaming. Reducing the GST on health and life insurance premiums could bring much-needed relief to policyholders, especially senior citizens. At the same time, new proposals such as imposing 18% GST on digital payments above ₹2,000 could increase transaction costs.