GST Exemption on Life and Medical Insurance Policies Must Benefit People, Not Companies: Bhatti

Hyderabad: Deputy Chief Minister and Finance Minister Mallu Bhatti Vikramarka on Wednesday said that exempting all individual life and health insurance policies, along with reinsurance, from Goods and Services Tax (GST) would significantly increase insurance penetration and density across the country. He, however, stressed the need for a proper mechanism to ensure that the benefit of such an exemption reaches the policyholders rather than enriching insurance companies.

Bhatti Vikramarka pointed out that while states may lose a portion of revenue, which otherwise could be used for welfare schemes, the exemption would truly serve its purpose only if the tax relief directly benefits the end-customers. “The objective must be to encourage more people to purchase insurance coverage, not to increase the profits of insurers,” he said. He reminded that the Telangana government was already covering nearly 95 lakh families under various insurance schemes, demonstrating its commitment to social protection.

The Deputy Chief Minister was speaking in the meeting of the Group of Ministers (GoM) in Delhi. The GoM, constituted by the GST Council, has been tasked with examining and recommending whether life and health insurance services should be exempted from GST. Finance Ministers of Bihar, West Bengal, Meghalaya, Punjab, Uttar Pradesh, Telangana, Tamil Nadu, Gujarat, Rajasthan, Andhra Pradesh, Karnataka, Kerala, and Goa are part of the committee.

Bhatti welcomed the Union government’s proposal to remove the 12 per cent GST slab and reduce rates on select goods and services. At the same time, he expressed concern that the plan also includes raising tax rates on some other items. “We need to study these proposals carefully to ensure that consumers benefit while also assessing the impact on state revenues and the available compensation mechanisms,” he noted.

He reminded that the GST Council has already constituted another GoM dedicated to rate rationalisation. He suggested that the new proposals, including those relating to exemptions and adjustments, be referred to the existing panel for a detailed examination before a final decision is taken. “The matter requires a threadbare study, so that the GST Council has comprehensive recommendations on which to act,” he remarked.

The Deputy Chief Minister also flagged the Centre’s proposals regarding the compensation cess, observing that these too could be taken up by the rate rationalisation GoM for a holistic review. He further suggested expanding the membership of the GoM so that the views of a larger number of states are represented while framing recommendations.

Bhatti Vikramarka said the Telangana government would continue to support reforms that balance people's welfare with the fiscal needs of states, while ensuring that crucial services such as health and life insurance become more accessible and affordable.