1 hr ago
GST Council May Allow Credit on Employee Insurance
Companies often buy health or life insurance for their employees.
They currently pay GST on these group insurance policies, and generally cannot claim that tax back as a credit.
The GST Council may discuss a proposal to let eligible companies claim that credit.
The tax on group policies would still apply.
Insurance industry representatives say the change could make coverage less costly for employers.
They believe more businesses might then offer insurance or provide better coverage.
The Council is also expected to discuss tax rules affecting banks and other financial services.
It may also consider ending an exemption for certain precious-metal imports by banks and nominated agencies.
The GST Council may consider allowing employers to claim input tax credit on GST paid for group life and health insurance.
The proposal is expected to be discussed at the Council’s 57th meeting, scheduled for Wednesday; the article does not give a date.
GST on group policies would remain, but eligible employers could recover it as credit instead of treating it as a cost.
Industry representatives say the change could encourage more employers, including smaller businesses, to offer coverage and improve employee benefits.
Other proposals concern bank input tax credits, transactions between branches and financial institutions, and ending an import-tax exemption for gold, silver and platinum.
- Who
- The GST Council is expected to consider proposals affecting employers, banks, insurers and other financial institutions.
- What
- The proposals include input tax credit for GST on employer-provided group insurance, alongside other changes to financial-services taxation.
- Where
- India.
- When
- At the 57th GST Council meeting, scheduled for Wednesday; no calendar date is specified.
- Why
- The insurance-credit proposal aims to make GST paid on group policies recoverable by eligible employers rather than leaving it as a cost.
Key facts
- Insurance GST rate
- The article says GST on group insurance policies remains 18%.
- Council meeting
- The proposals are expected to be taken up at the 57th GST Council meeting, scheduled for Wednesday.
- Employer group health premiums
- Premiums in FY26 were reported at over ₹68,000 crore.
- Estimated tax on premiums
- At 18%, GST on the entire reported premium would be around ₹12,000 crore; the actual credit benefit depends on eligibility and use.
- Potential corporate benefit
- An insurance executive estimated the proposal could unlock upwards of ₹5,000 crore for corporates on group health insurance alone.
- Group life premiums
- The life insurance industry collected around ₹2.75 lakh crore in group insurance premiums, according to the article.
- Bank credit mechanism
- Banks can opt to claim 50% of eligible input tax credit each month and forgo the remainder, subject to the scheme described in the article.
Quotes
A person familiar with the proposal
A source familiar with the proposed input tax credit change.
“It is a long-pending demand of corporates that the chain of input tax credit should not be broken. Companies used to pay tax on health insurance for their employees, which used to sit in their P&L. They will be able to take credit once the proposal is approved.”
financialexpress.com
“Tax is charged on that cover, and until now the business could not recover it. That tax is now recoverable as credit.”
financialexpress.com
Senior insurance broking executive
An executive in the insurance broking industry.
“A substantial portion of the business is affected because GST paid by corporates on group health insurance is not available as input tax credit and falls under blocked credit. In many organisations, that becomes a deterrent to providing group health cover.”
financialexpress.com
Sources
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