As GST Council prepares to take a call on restructuring rate on various insurance products, government told the Lok Sabha on Monday that GST on insurance premia fetched over ₹52,000 crore in last 5 years. Centre also said GST collection from unexempted educational services was around ₹12,000 crore.
It may be noted that going by the formula of distribution and devolution, States are major beneficiary of this rise as they get over 70 per cent of GST collected.
Data mentioned in the written answer by Minister of State in the Finance Ministry Pankaj Chaudhary showed that GST collection was over ₹29,000 crore, while it was over Ts 23,000 crore through health insurance premia. Around ₹4,700 crore was collected through re-insurance premia under life and health insurance.
Health insurance
As things stand, the GST rate on premia for health insurance, term and unit-linked insurance plans attracts 18 per cent GST. On endowment plans, the GST is applied differently. While it is 4.5 per cent for premium paid during the first year, it is 2.25 per cent from the second year. For life insurance in the form of single premium annuity policies, the GST rate is 1.8 per cent. Rates are the same for all age groups.
According to Chaudhary, GST Council in its meeting on September 9 discussed the issue of exempting/reducing the GST on life and health insurance. It recommended to refer this matter to a Group of Ministers (GoM) to holistically look into the issues. “First meeting of the GoM was held on 19th October 2024 at New Delhi where the issues of GST rates on health and life insurance policies were discussed. The recommendations of the GoM when received will be placed before the GST Council,” Chaudhary said.
However, according to sources, in October 19 meeting, members of the GoM advocated exempting premiums paid on health insurance for senior citizens, health insurance with a coverage of ₹5 lakh and term life insurance. For all other policies, GST rates should remain at 18 per cent, sources said. Now, it is expected that the recommendation will be taken up the GST Council in its meeting on December 21 at Jaisalmer (Rajasthan).
Un-exempted Educational Services
In another written answer by Chaudhary, data showed that GST collected on education services, which are not exempted, such as commercial training and coaching was around ₹12,000 crore. “Services provided by educational institutions to its students, faculty, and staff are exempt from GST,” he said. Educational institution means an institution providing services by way of pre-school education and education up to higher secondary school or equivalent, education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force and education as a part of an approved vocational education course.
Additionally, services provided to schools such as transportation of students, faculty and staff, catering, including mid-day meals sponsored by government and security or cleaning or housekeeping services are also exempted. However, the services such as commercial training and coaching services attract 18 per cent GST.