State Bank of India (SBI) research has said in its report that the goods and service tax (GST) on life, health, and term premiums should either be reduced to 5 per cent or a “nil” rate so as to cover the maximum population of the country. As currently, insurance premiums are taxed at 18 per cent when insurance penetration in the country is merely 4.2 per cent.
Further, the research has also suggested to increase insurance penetration in the country, the government may look to enrol the workers of Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) under the Pradhan Mantri Jivan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) for a premium of Rs 342.
Besides, the report has recommended that the government may announce an opt-in scheme for health insurance in line with Jan Suraksha schemes. The opt-in scheme may be implemented by auto debit amount from the interest from savings account and paid towards mediclaim policy.
Regarding this, the insurance industry has been advocating a reduction in GST rates on premiums for a very long time. While there have been several calls from the industry to the government for a relook at GST on premiums, there has not been much development on this front.