GST GoM Convenor and Bihar Deputy CM Samrat Choudhary on Wednesday announced that the GoM has decided to back the Centre’s recommendation to fully exempt the Individual Life and Health Insurance policy from GST, which is currently 18%.
SBI Life Insurance, HDFC Life Insurance, LIC, ICICI Lombard, other insurance stocks rallied on Thursday after reports indicated that the GST Council's Group of Ministers (GoM) has recommended exempting life and health insurance premiums purchased by individuals from Goods and Services Tax (GST).
According to media reports, the GoM on insurance has proposed that these premiums be exempted from the levy. The final decision, however, will rest with the GST Council after wider consultations with states.
GST GoM Convenor and Bihar Deputy CM Samrat Choudhary on Wednesday announced that the GoM has decided to back the Centre's recommendation to fully exempt the Individual Life and Health Insurance policy from GST, which is currently 18%.
On the stock exchanges, SBI Life Insurance Company shares gained 1.7%, HDFC Life Insurance share price rose 1.31%, ICICI Lombard General Insurance advanced 1.28%, and ICICI Prudential Life Insurance climbed 1.53%. State-owned LIC gained 1.91%, while General Insurance Corporation of India added 2.75%.
Among other players, Star Health and Allied Insurance surged 3.02%, Go Digit General Insurance advanced 2.03%, and Niva Bupa Health Insurance rallied 4.46%.
The proposal to reduce GST rates comes as part of the broader GST 2.0 reforms announced by Prime Minister Modi in his Independence Day speech. Reports say that GST may be rationalised into two major slabs: 5% and 18%, with a sin tax rate of 40%.
According to Avinash Singh, Senior Research Analyst at Emkay Global Financial Services Ltd, on a relative basis, SBI Life Insurance appears to be in a beneficial position, given its relatively lower cost structure versus peers.
"Overall, improving affordability of Life and Health products provides growth tailwinds to the sector," Singh said.
Even as this GoM recommendation has brought more questions than answers regarding the breadth of coverage of the products category and the implications for Input Tax Credit (ITC), one thing that is abundantly clear is that prices of Retail Health and Life Insurance products will come down for customers and any benefits from GST cuts must be passed by insurers to customers, he added.