New Delhi, Sep 22 (PTI) Insurance premiums of life and health insurance have become cheaper from Monday following the complete removal of 18 per cent Goods and Services Tax (GST) as next generation GST 2.0 reforms kicked in.

All individual health insurance policies, including family floater policies and policies for senior citizens and reinsurance, are exempt from GST effective September 22.

Since its inception in July 2017, GST at the rate of 18 per cent has been levied on premiums paid towards health insurance and life insurance.

Individual policyholders can save up to 18 per cent GST levied on the insurance premium by any insurer from Monday.

The decision to this effect was taken at the 56th GST Council meeting held on September 3. The council decided to exempt all individual life insurance policies, whether term life, ULIP or endowment policies and subsequent reinsurance from GST.

Following the GST Council, public sector insurance companies, including Life Insurance Corporation of India (LIC), announced the exemption of GST.

The government has collected Rs 16,398 crore from goods and services tax (GST) levied on healthcare and life insurance in FY24.

Of this, Rs 8,135 crore came from life insurance and Rs 8,263 crore from health insurance. Additionally, Rs 2,045 crore was also raised as GST from re-insurance on life and health insurance last fiscal, including Rs 561 crore from reinsurance on life and Rs 1,484 crore on health care.

GST on healthcare and life insurance services brought in Rs 16,770 crore in FY23, including Rs 9,132 crore from life insurance and Rs 7,638 crore from healthcare insurance.

The 56th GST Council, chaired by Union Finance Minister and comprising ministers from all states, has agreed on two tax rates of 5 and 18 per cent by moving products from the current 12 and 28 per cent slab to lower rates.

A special 40 per cent rate would be levied on a select few items.

A 4-tier GST structure of 5, 12, 18 and 28 per cent was implemented from July 1, 2017, when the Centre and states agreed to subsume most of their taxes, like excise duty and VAT, into one uniform tax. PTI DP DRR

GST exemption on individual life and health insurance premiums removes tax burden on insureds, lowering premium costs. The regulatory change exempts all individual life and health insurance premiums, including family floater, senior citizen policies and related reinsurance, from Goods and Services Tax effective September 22, removing the previously applied GST on such premiums pursuant to the 56th GST Council decision and implemented by insurers.