India is considering a proposal to either fully exempt or reduce the 18% Goods and Services Tax (GST) currently levied on life and health insurance premiums. This move is expected to make insurance more affordable for policyholders, benefiting consumers while potentially creating challenges for insurers.
A group of ministers has already recommended a complete GST waiver, and the matter is likely to be discussed in the upcoming GST Council meeting scheduled for mid-September. While insurers agree that the proposal could lower costs for consumers, they are concerned that it may lead to squeezed margins due to the loss of input tax credit (ITC).
Rakesh Jain, CEO of Reliance General Insurance, explained, “The inverted duty structure in GST often results in accumulated ITC that cannot be fully utilized. This mismatch raises operational costs and causes inefficiencies. Unless this issue is addressed, insurers will face margin pressures even with lower premiums for customers.”
Despite the challenges for insurers, Jain sees the potential long-term benefits of the reform. “Reducing the cost barrier will encourage more people to adopt health insurance, which will strengthen the country’s overall social security system. This reform has the potential to be a game-changer for the insurance industry, benefiting both customers and the economy.”
Jude Gomes, MD and CEO of Ageas Federal Life Insurance, shared a similar view, stating that the move could boost insurance penetration and support the growth of the healthcare sector. “This change aligns with the vision of ‘Insurance for All by 2047,’ fostering deeper penetration in both urban and rural areas and contributing to a healthier, more productive India.”
Related topics:
