Bihar Deputy Chief Minister and convenor of the Group of Ministers (GoM) on insurance, Samrat Choudhary, said on Wednesday that the proposal has been discussed and will now be placed before the GST Council for approval.
“Centre’s proposal is clear that for the insurance sector, individual and family (policies) should be exempt from GST. This has been discussed, and the GoM report will be presented to the Council,” Choudhary told reporters after the meeting of the GoM.
He further added: “All members have given their approval for lowering rates, some states have given their own views,” noting that a final call on rates will be taken by the Council.
Finance Minister Nirmala Sitharaman, who addressed the GoM at the opening, urged states to deliberate collectively on the proposals.
“She set the ball rolling and suggested that states should sit together and debate on the proposals,” said Gajendra Singh, providing an update on the ongoing deliberations.
Discussions on insurance are still underway, with no final decision or recommendations yet. Some states have expressed reservations, while others have welcomed the move.
Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka, confirmed that the GoM is likely to propose a complete exemption of GST on health and life insurance.
“Overall loss for this will be ₹9,700 crore but still we need to be meticulous. Telangana is of the view that we should ensure that GST benefits are passed on to the consumers and not companies,” he said.He also pointed out:
“Few states are concerned that whether insurance companies will pass on the benefits of lower GST rates to the policy holders or not and Council should have a framework to ensure the consumers get the benefits.”
Rajasthan has separately raised concerns about potential revenue loss on account of duty reductions in the solar segment, though officials acknowledged the sector could see an overall boost.
Currently, life and health insurance premiums attract 18% GST — a levy long criticised by insurers and policyholders for inflating costs and discouraging penetration. Removing GST from such products is expected to make them more affordable and could give a fillip to the government’s goal of expanding insurance coverage across households.
The Centre’s proposal on insurance is part of the broader next-gen GST reform blueprint, which aims to collapse the current four-rate structure into just two slabs — a 5% “merit rate” and an 18% “standard rate.” While most goods and services would fall under one of these two categories, insurance is likely to be treated as a special case and moved out of the GST net entirely.
Meanwhile, in a post on X, the Finance Ministry reiterated the government’s consultative approach, saying:
“The Central Government remains committed to building a broad-based consensus with the States in the coming weeks to implement the next generation of GST reforms in the spirit of cooperative federalism.”
The GoM on health and life insurance continues its deliberations today, while another key GoM on rate rationalisation is scheduled to meet tomorrow. The reports from these ministerial groups will form the basis of the GST Council’s decisions in the coming weeks.
