Parliamentary Committee on Finance recommends lowering GST on insurance products

The Indian insurance sector has witnessed robust growth in recent years, yet it grapples with challenges such as low insurance penetration. The parliamentary committee on finance recently engaged with industry officials, representatives from the Insurance Regulatory and Development Authority of India (IRDAI), and the Ministry of Finance to explore ways to fortify the insurance landscape in the country.

One of the committee's notable recommendations revolves around rationalising the Goods and Services Tax (GST) rate on insurance products. Currently set at 18%, the committee proposes specific attention to health insurance products, especially retail policies for senior citizens and micro-insurance policies. By adjusting the tax rate on these products, the committee aims to make insurance more accessible to a wider demographic.

The committee also emphasises the need to revisit the minimum capital requirement for companies entering the insurance sector, currently set at ₹100 crore. Advocating for the rationalisation of this threshold, the committee suggests that a lower capital requirement would encourage smaller niche players to enter the market. This, they argue, would lead to a more diverse range of insurance offerings and better coverage across different regions of the country.