GST 2.0 structure: GoM on GST rate rationalisation to meet on Thursday
GST exemption on health and life insurance premiums may cause revenue loss of Rs 9,700 crore.
- Aug 20, 2025,
- Updated Aug 20, 2025 5:53 PM IST
The Group of Ministers (GoM) on rate rationalisation under the Goods and Services Tax (GST) Council will meet on Thursday to deliberate on the Centre’s proposals on restructuring rates of the indirect tax levy. The GoM on GST on health and life insurance met on Wednesday while the meeting of the GoM on compensation cess is currently underway.
The GoM on health and life insurance is broadly of the view that health and life insurance premiums should be exempt from GST. Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka said some mechanism has to be devised to ensure that the GST exemption goes to policyholders. The exemption may lead to a revenue loss of Rs 9,700 crore, he said. It is to be noted that the GST exemption on health and life insurance policies will be available for individuals only.
Union Finance Minister Nirmala Sitharaman also addressed the GoMs and explained the Centre’s proposals on GST, which include two rates of 5% and 18% along with a 40% rate on sin goods, while doing away with the 12% and 18% rates.
“During the meeting, the Union Finance Minister emphasised that the proposal by the central government is with a vision to usher in the next generation of GST reforms in India’s journey towards becoming Atmanirbhar Bharat,” said a post by the finance ministry on X.
The GoM on rate rationalisation will take up this proposal in its meeting on Thursday. States are expected to discuss their concerns and give their suggestions on the proposals.
Some state ministers indicated that the proposals would help the common man by reducing tax rates and boost consumption. However, some states have raised concerns over potential revenue losses. Once finalised, the report of the GoMs will be submitted to the GST Council for a final decision.
Prime Minister Narendra Modi, in his Independence Day speech, had promised next-generation reforms in the GST by Diwali.
At present, health insurance, term life insurance, and unit-linked insurance plans (ULIPs) attract 18% GST, a rate widely criticised by industry veterans as prohibitive. Analysts argue the levy discourages wider adoption of insurance in a country where penetration remains low. If approved, the exemption—or even a sharp reduction—could significantly alter both customer behaviour and industry growth.
The Group of Ministers (GoM) on rate rationalisation under the Goods and Services Tax (GST) Council will meet on Thursday to deliberate on the Centre’s proposals on restructuring rates of the indirect tax levy. The GoM on GST on health and life insurance met on Wednesday while the meeting of the GoM on compensation cess is currently underway.
The GoM on health and life insurance is broadly of the view that health and life insurance premiums should be exempt from GST. Telangana Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka said some mechanism has to be devised to ensure that the GST exemption goes to policyholders. The exemption may lead to a revenue loss of Rs 9,700 crore, he said. It is to be noted that the GST exemption on health and life insurance policies will be available for individuals only.
Union Finance Minister Nirmala Sitharaman also addressed the GoMs and explained the Centre’s proposals on GST, which include two rates of 5% and 18% along with a 40% rate on sin goods, while doing away with the 12% and 18% rates.
“During the meeting, the Union Finance Minister emphasised that the proposal by the central government is with a vision to usher in the next generation of GST reforms in India’s journey towards becoming Atmanirbhar Bharat,” said a post by the finance ministry on X.
The GoM on rate rationalisation will take up this proposal in its meeting on Thursday. States are expected to discuss their concerns and give their suggestions on the proposals.
Some state ministers indicated that the proposals would help the common man by reducing tax rates and boost consumption. However, some states have raised concerns over potential revenue losses. Once finalised, the report of the GoMs will be submitted to the GST Council for a final decision.
Prime Minister Narendra Modi, in his Independence Day speech, had promised next-generation reforms in the GST by Diwali.
At present, health insurance, term life insurance, and unit-linked insurance plans (ULIPs) attract 18% GST, a rate widely criticised by industry veterans as prohibitive. Analysts argue the levy discourages wider adoption of insurance in a country where penetration remains low. If approved, the exemption—or even a sharp reduction—could significantly alter both customer behaviour and industry growth.