Parliamentary panel recommends cut in GST on insurance products

A recent report by the Standing Committee on Finance, chaired by Jayant Sinha, suggests a reduction in the Goods and Services Tax (GST) on insurance products, particularly health and term insurance, which currently stands at 18 percent. The committee believes that the high GST rate contributes to a substantial premium burden, acting as a deterrent for individuals to opt for insurance policies.

To make insurance more accessible and affordable, the committee recommends a reduction in GST rates, specifically for health insurance products, including retail policies for senior citizens, micro-insurance policies (up to ₹5 lakh under PMJAY), and term policies.

Despite the dynamic growth of the insurance industry in India, with total premiums on the rise due to government-initiated reforms, the penetration and density of Indian insurance products remain relatively low. In 2021, India held the tenth position in the global insurance market with a market share of 1.85 percent, according to Swiss Re data.

Total insurance premiums in India witnessed a significant increase of 13.46 percent in 2021 (7.8 percent inflation-adjusted real growth), outpacing the global growth rate of 9.04 percent (3.4 percent inflation-adjusted real growth). In the life insurance sector, India secured the ninth position globally in 2021, while in the non-life insurance business, it held the fourteenth position.

The committee emphasizes the urgent need to educate consumers about the benefits of various insurance products, extending beyond life insurance. They recommend launching an awareness campaign, in collaboration with insurance companies and the Insurance Regulatory and Development Authority of India (IRDAI). The campaign should feature reputed celebrities endorsing different insurance products, emphasizing the importance of securing one's family through policies covering motor, home, and health insurance.

As discussions surrounding the potential reduction in GST on insurance gain momentum, the report underscores the broader goal of enhancing awareness and encouraging more individuals to avail themselves of diverse insurance options for comprehensive protection.