Udaipur, December 13, 2024 - The Standing Committee on Finance recently presented its report in Parliament on the imposition of GST and TDS on insurance premiums. The report, placed in both the Rajya Sabha and Lok Sabha, asked for their immediate removal because they were making it difficult for the common man to afford health and life insurance.

Readers may recall that earlier, at a GST Council in September, there was a general consensus on removing GST on insurance, but the final decision is to be taken in the meeting scheduled for December 21.

In its report, the committee said that for government companies, it is mandatory to deduct 2% TDS on insurance commissions when the commission amount exceeds Rs 2.5 lakh. However, this requirement does not apply to private companies. The 2% TDS is split equally between the Centre and the State, with 1% each.

In fact, the Insurance Regulatory and Development Authority of India (IRDAI) itself had recommended to the Central Government that insurance products be kept free from GST.

However, the Centre cautioned that removing GST on insurance would not be easy as it had generated Rs 16,000 crore in tax in the fiscal year 2023-24.

The committee urged the Finance Ministry, along with the GST Council and the Revenue Department, to take a decision on this matter with keeping in mind that imposing taxes on insurance would make it difficult to bring a large segment of the population, currently outside of insurance coverage, into the system.

According to the report, the imposition of GST on insurance premiums in the U.S. led to extremely unfavourable outcomes. This is why the European Union and Canada have kept insurance products exempt from GST and VAT.

Source: Media Reports