GST Council to Review Health and Life Insurance Rate Adjustments in November

Finance Minister Nirmala Sitharaman announced Monday that the GST Council will review rate restructuring for health and life insurance premiums in its upcoming meeting in November. The Council has decided to form a Group of Ministers (GoM) to explore reducing tax rates on life and health insurance. Additionally, the finance minister highlighted the significant revenue collected from online gaming and casinos following last year’s GST Council recommendations.

In a press conference, Finance Minister Nirmala Sitharaman announced that a Group of Ministers, chaired by Bihar's Deputy Chief Minister Samrat Chaudhary, has been formed to comprehensively review GST issues related to life and health insurance. The GoM has been tasked with providing a report by the end of October, which will be considered by the GST Council at its November meeting.

Currently, health insurance, term insurance plans, and unit-linked insurance plans are subject to an 18% GST rate. For endowment plans, the GST rate is 4.5% on premiums paid during the first year and 2.25% from the second year onwards. Single premium annuity policies are taxed at 1.8%. These rates apply across all age groups and may be adjusted based on the GST Council’s recommendations.

The Council unanimously endorsed the formation of a new Group of Ministers (GoM), led by Minister of State for Finance Pankaj Chaudhary, to address the handling of collections from the cess on luxury and sin goods after its sunset date of March 31, 2026. Although compensation to states ended in June 2022, the cess has been extended until March 31, 2026, to cover the repayment of back-to-back loans and interest taken to compensate states for revenue shortfalls during the COVID-19 pandemic.

Finance Minister Nirmala Sitharaman stated, “We expect the repayment process to be completed by January 2026. Since the compensation cess is legally mandated for loan and interest repayment, we need to find alternative uses for the funds after that date. The GoM will explore these options and consider the mechanisms for such levies.”

Online Gaming

The finance minister also reported significant increases in revenue from online gaming, casinos, and horse racing following the implementation of clarificatory laws imposing a 28% GST from October 1. Revenue from online gaming surged by 412% to ₹6,909 crore in the six months following the new law, compared to ₹1,349 crore in the previous six months. Similarly, casino revenue increased by 30% to ₹214 crore from ₹164.6 crore during the same period.

Relief to Foreign Airlines

Additionally, the Council recommended exempting foreign airlines from GST on the import of services from related entities outside India when provided without consideration. This recommendation also includes regularising past periods on an 'as is where is' basis. Currently, ten foreign airlines have received notices totalling ₹10,000 crores. However, this exemption will not apply to other sectors, and separate decisions will be made for them.