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GoM on health insurance-related GST work requires more time as IRDAI’s inputs are awaited, said FM Sitharaman on December 21
Insurance stocks fall up to 6% as Council defers decision on GST relief for life, health insurance premiums
Shares of insurance companies, including both life and general insurers, dropped by up to 6% on the BSE in Monday’s intra-day trade after the Goods and Services Tax (GST) Council postponed its decision on GST rates for insurance. As a result, the GST on insurance remains unchanged.
The GST Council deferred decisions on reducing taxes for life and health insurance premiums, as well as the anticipated rationalization of 148 items, as the Group of Ministers (GoM) panel needs more time to finalize its reports.
Union Finance Minister Nirmala Sitharaman explained in a post-meeting briefing that the report on rate rationalization is not yet final. Regarding life and health insurance premiums, the GoM is awaiting inputs from the Insurance Regulatory and Development Authority of India (IRDAI). Once these inputs are received, the reports will be finalized and presented to the Council for discussion.
Shares of New India Assurance Company (Rs 200.80) and General Insurance Corporation of India (Rs 485.55) fell by 6% and 3%, respectively. On Friday, General Insurance Corporation had surged 14% to Rs 502.75, and New India Assurance had risen 4% to Rs 214.15 in an otherwise weak market.
Other insurance stocks, including ICICI Prudential Life Insurance, ICICI Lombard General Insurance, SBI Life Insurance, HDFC Life Insurance, Star Health, LIC, and Niva Bupa Health Insurance, saw declines ranging from 1% to 2%.
Over the past month, ICICI Prudential, HDFC Life, and SBI Life have experienced declines of 6% to 10%, compared to a 2% drop in the benchmark index.
While the issue is still under review, ICICI Securities noted that the uncertainty surrounding the Council’s decision and the implementation timeline is expected to keep insurance stocks under pressure in the near term.
The brokerage also highlighted that insurance penetration in India remains low compared to international standards. Long-term growth drivers for the sector include factors such as a large protection gap and rising per capita income. “India has a high protection gap, and credit protection products are in the early stages, with significant growth potential as retail loan penetration improves. Thus, the insurance sector in India holds immense growth prospects,” it added.
Analysts believe that strong companies with the right mix of products, services, and distribution are likely to benefit most from this opportunity. However, regulatory changes and increased competition pose risks that could impact profitability.
