Govt weighs nil GST for health & life insurance

There is unanimity on the need to reduce the goods and services tax (GST) on health and life insurance premia from 18%, but consensus eludes on what the final rate should be: nil, 5% or 12%.

- Subhash Narayan & Gireesh Chandra Prasad

The central government is open to fully exempting health and life insurance premia from the GST, said two persons aware of the development.

But the insurance industry, at a meeting with finance ministry officials last week, proposed 12% as it would allow companies to fully claim credit against GST paid on inputs, the people said, speaking on the condition of anonymity.

Some state ministers, however, are batting for 5%, arguing that would cushion the impact on the exchequer. While a few suggested that insurers should be allowed to set off this liability against the taxes they pay on the services and goods that go into their operations, others did not favour the input tax credit, said the first person cited earlier.

Federal indirect tax body GST Council has sought suggestions on GST reduction from the Insurance Regulatory and Development Authority of India (Irdai), which is expected to place the industry's view before it.