Lok Sabha Question No. 3305 (UNSTARRED), answered on 2024-12-16
Subject: GST exemption on Insurance Premium for Senior Citizens
Ministry: FINANCE
Asked by: Shri Manickam Tagore B, Shri Vijayakumar Alias Vijay Vasanth

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE LOK SABHA UNSTARRED QUESTION NO.3305

## TO BE ANSWERED ON MONDAY, DECEMBER 16, 2024

## GST EXEMPTION ON INSURANCE PREMIUM FOR SENIOR CITIZENS

## 3305. SHRI VIJAYAKUMAR ALIAS VIJAY VASANTH :

SHRI MANICKAM TAGORE B:

Will the Minister of FINANCE वित्त मंत्री be pleased to state:

- (a) the details of the GST Council's stance on taxing health and life insurance premiums;
- (b) the impact of the proposed rate rejig on over 100 items on consumers and businesses;
- (c)  the  estimated  revenue  loss  from  exempting  term-life  insurance  and  senior  citizens'  health insurance from GST;
- (d) the manner in which the Government would compensate for the potential revenue loss;
- (e) whether the GST rate on health insurance is reduced or exempted for certain categories like senior citizens;
- (f)  the  manner  in  which  the  proposed  tax  tweaks  on  wristwatches  and  shoes  affects  domestic manufacturers;
- (g) the time by which the GST Council's decisions are likely to be implemented;
- (h) the timeline for submitting the Group of Ministers' reports;
- (i) the basis on which the additional revenue of Rs. 22,000 crore is allocated; and
- (j)  whether  the  Government  would  reconsider  the  GST  rates  on  food  items  like  parotta  etc. considering manufacturers concerns?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a): GST rates and exemptions are prescribed on the recommendations of GST Council, which is a Constitutional body comprising of representatives from States/UTs and Centre.

At present, GST on health insurance services is levied at standard rate, i.e., 18 per cent. Specific health  insurance  schemes  catering  to  the  needs  of  differently  abled  and  economically  weaker sections  of  the  society,  such  as  Rashtriya  Swasthya  Bima  Yojana  (RSBY),  Universal  Health Insurance  Scheme,  Jan  Arogya  Bima  Policy,  Niramaya  Health  Insurance  Scheme  are  exempt from GST.

GST on life insurance services is also levied at standard rate, i.e. 18 per cent.

Rule 32(4) of the CGST Rules, 2017 provides for the valuation to be adopted in the case of life insurance business. The premium paid in life insurance policies represents two portions  - risk coverage and savings. GST is only on the risk portion of the premium and not on the savings portion, as detailed below:

| Circumstance                                                                                              | Valuation of taxable service                                                                                                     |
|-----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|
| Policies where amount of investment/ saving is intimated to policyholder at the time of supply of service | Gross premium charged reduced by amount allocated for investment/ saving as intimated                                            |
| Term life insurance policies (with only risk element)                                                     | Full value                                                                                                                       |
| Single premium annuity policies other than above                                                          | 10% of single premium charged (Effective rate becomes 1.8%)                                                                      |
| In all other cases                                                                                        | 25% of the premium in first year (Effective rate is 4.5%) and 12.5% of the premium in subsequent years (Effective rate is 2.25%) |

Life  insurance  services  provided  under  specific  schemes  such  as  Varishtha  Pension  Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Vaya Vandan Yojana, etc are exempt from GST.

Furthermore, all the fully government sponsored insurance schemes, such as Ayushman Bharat PM-JAY, are also exempt from GST.

The issue of GST on life and health insurance was placed before the GST Council in its 54th Meeting  held  on  09th  September,  2024  at  New  Delhi.  After  detailed  deliberations,  the  GST Council  recommended  to  constitute  a  Group  of  Ministers  (GoM)  to  holistically  look  into  the issues  pertaining  to  GST  on  life  insurance  and  health  insurance.  Accordingly,  a  Group  of Ministers (GoM) on Life and Health Insurance was constituted under the Chairmanship of Sh. Samrat Chaudhary, Hon'ble Deputy CM, Bihar. The GoM on Life and Health Insurance has not yet submitted its report to the GST Council.

- (b): The GST Council in its 45th Meeting held on 17th September, 2021 had constituted a Group of  Ministers  (GoM)  on  Rate  Rationalization.  The  GoM  on  Rate  Rationalization  has  not  yet submitted its report to the GST Council.
- (c):  Revenue  loss  depends  on  the  GST  rate  reduction  or  exemption.  In  absence  of  any recommendation for reduced rate or exemption, no estimate can be made for the revenue loss.
- (d): Does not arise in view of reply to (c) above.
- (e): Details provided in reply to part (a) above.
- (f): Does not arise in view of reply to (b) above.
- (g): Does not arise in view of reply to (a) and (b) above.
- (h): In the 54 th GST Council Meeting held on 09 th September, 2024, the Council had asked the GoM on Life and Health Insurance to submit the report by end of October 2024.

In the 47th GST Council Meeting held on 28th June, 2022, the GoM on Rate Rationalization had sought extension of three months for completing deliberations on remaining Terms of Reference and submission of final report.

- (i): Does not arise in view of reply to (b) above.
- (j): GST rates are prescribed on the recommendations of GST Council, which is a Constitutional body comprising of representatives from States/UTs and Centre. No such recommendation of the GST Council has been received.

*******