The Goods and Services Tax (GST) Council is set to discuss four possible options regarding the tax treatment of health insurance in its upcoming meeting on Monday. These options could potentially result in a fiscal impact ranging from ₹650 crore to ₹3,500 crore, according to reports from officials.
Council’s Proposal and Impact
The GST Council’s fitment panel, consisting of revenue officials from both central and state governments, has conducted an in-depth analysis of the proposals. The discussion follows a request from the Department of Financial Services (DFS) to lower taxes on health insurance products, making them more affordable and accessible to the general public.
Four Proposed Options
The fitment panel is expected to present a detailed report to the Council, which includes four primary options for tax relief:
1. Full Exemption: A complete exemption from GST on all health insurance premiums and reinsurance.
2. Reduced Rate: A reduction of the current GST rate on health insurance services from 18% to 5%.
3. Partial Exemptions: Exempting certain categories of health insurance, such as senior citizens or low-income groups, while maintaining the standard tax rate for others.
4. Slab-Based Reduction: Introducing a slab-based approach with different GST rates depending on the value of the health insurance product.
These measures are intended to increase the affordability of health insurance policies and expand coverage across different demographics, easing the financial burden on individuals and families seeking medical care.
Cost to the Exchequer
The total cost of these measures could range significantly, from ₹650 crore to ₹3,500 crore, depending on which option the Council selects. The decision will balance between providing tax relief to consumers and managing fiscal discipline.
