Insurance stocks in focus as GoM proposes to exempt GST on premiums

Insurance stocks like HDFC Life Insurance and SBI Life Insurance, among others, will be in focus on Thursday after the Goods and Services Tax (GST) Council’s group of ministers (GoM) favoured exempting health and life insurance premiums for individuals from GST.

This move could provide substantial relief to policyholders and potentially boost the sector’s outlook.

The proposal comes as part of the wider GST 2.0 reforms, which aim to simplify the tax structure, enhance affordability, and reduce compliance burdens.

Currently, health and life insurance premiums attract 18% GST, but the Centre has suggested that individual insurance policies should be exempt. The GoM on insurance, led by Bihar deputy chief minister Samrat Choudhary, has endorsed this proposal, while commercial and group insurance products may continue to be taxed at the existing rate.

According to officials, the exemption on individual policies could result in an estimated annual revenue loss of Rs 9,700 crore, but the measure is expected to provide relief to millions of households.

Telangana deputy chief minister Mallu Bhatti Vikramarka, a GoM member, noted that most states supported the move but raised concerns about ensuring that the benefit of tax cuts is passed on to consumers, given the lack of input tax credit in such cases.

Finance minister Nirmala Sitharaman described GST 2.0 as being anchored on three pillars – structural reforms, rate rationalisation, and ease of doing business – aimed at benefiting consumers, farmers, MSMEs, and the middle class. She emphasised that the reformed regime will enhance affordability, boost consumption, and make essential and aspirational goods more accessible.

The broader GST revamp also includes a proposal to scrap the 12% and 28% slabs, retaining only a two-rate structure of 5% and 18%, along with a special 40% rate for select goods such as cigarettes and luxury cars.

Prime Minister Narendra Modi, in his Independence Day address, had described the overhaul of the eight-year-old tax system as a “Diwali gift” to the people.

Samrat Choudhary confirmed that the GoM will submit its report to the GST Council, which will take the final decision. The council is expected to meet in September to deliberate on the proposal, with all states broadly in favour of lowering rates, though some have expressed differing views.

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