The GST Council will likely exempt term life insurance policies from the goods and services tax (GST) in its September 9 meeting. However, it will continue to tax insurance policies with an investment component.
According to government estimates exempting the levy on life insurance could lead to a Rs 200-crore revenue loss per annum, Moneycontrol reported citing government sources.
The decision is expected to make term life insurance more affordable and boost demand for pure protection policies. All types of health and life insurance policies attract 18 per cent GST.
“Life insurance with an investment portion will not be exempted. There is no sense in exempting that. It is basically an investment. We have to exempt the uncertainties of life, not investments,” the government official said as per Moneycontrol.
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A term life insurance is a pure protection plan that offers financial security to the beneficiaries in the case of the policyholder’s death during the term of the policy. The insurance provides coverage for a specified period ranging from 10 to 30 years. Premiums for term life insurance are normally lower as it offer a death benefit without any savings or investment component. If the policyholder outlives the term, there is no payout unless the policy includes a return of premium rider.
Earlier, the Union minister for road, transport and highways, had written to finance minister Nirmala Sitharaman to withdraw the GST on life and medical insurance premiums.
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Earlier this month, West Bengal finance minister Chandrima Bhattacharya had also asked for a cut in the 18 per cent tax rate on life and health insurance premiums during the rate rationalisation committee’s meeting.
The 54th GST Council meeting, headed by the union finance minister and comprising state ministers, will be held on September 9.
