Insurance GST likely to be cut to 5% at next council meeting

THE GOODS AND Services Tax (GST) Council is likely to meet in June or early July to consider reducing the tax rate on health and life insurance from 18% to 5% with input tax credit (ITC).

- PRASANTA SAHU

Among other matters, the council may examine the report of the group of ministers (GoM) on rate rationalisation to give further relief to people through rate reductions and rejig of the number of slabs. The GoM headed by Bihar deputy chief minister Samrat Chaudhary submitted its report in December 2024.

Due to the need for extended consultations with stakeholders and varied stands taken by states, the council had deferred a decision on the reduction of the tax rate on insurance since September 2024.

After extended consultations by the GoM on rate rationalisation, the council may take up the proposal to cut the tax rate on insurance to 5% with ITC, an official said, adding that the benefit of the tax cut has to be passed on to policyholders.

However, given that input services are taxed at a higher rate of 12/18%, insurance companies may have to absorb some of the losses on account of their inability to fully utilise their accumulated ITC.