CBIC to meet insurers, IRDAI today to ensure GST exemption benefits reach consumers

The Central Board of Indirect Taxes and Customs (CBIC) is set to hold a meeting with representatives from insurance companies and the sector regulator, the Insurance Regulatory and Development Authority of India (IRDAI), on Friday (September 12) to ensure a smooth rollout of the new GST rates.

Sources told CNBC-TV18 that the government will ask insurers to pass on the benefits of the exemption on life and health insurance premiums to consumers, while IRDAI will be tasked with monitoring compliance.

The meeting follows the GST Council’s decision on September 3 to exempt 18% GST on life and health insurance policies. While the exemption has been welcomed as a consumer-friendly measure, it comes with a caveat: insurers will not be able to claim input tax credit (ITC) or inversion benefits under the new structure.

Balancing relief and industry demands

The insurance sector has been lobbying for ITC and inversion benefits, arguing that denial of such credits would increase input costs and affect profitability. However, the government has stood firm, maintaining that ITC cannot be allowed if life and health insurance premiums are fully exempted from GST.

“Passing on the benefits to consumers is the priority. The government is clear that exemptions cannot be coupled with ITC,” said a senior official aware of the deliberations.

Ensuring smooth transition

Today’s meeting is part of a broader series of engagements with industry to ensure an effective transition to the new GST rates, which will come into effect on September 22.

CBIC has already held consultations with trade chambers, FMCG companies, and consumer durables manufacturers this week. These discussions revolved around price adjustments, compliance under the Legal Metrology Act, and the responsibility of companies to pass on rate cuts and exemptions.

For insurers, the directive is expected to focus on pricing transparency, with IRDAI asked to monitor companies closely to ensure that GST benefits are reflected in premiums.

Consumer-centric push

The move aligns with the government’s broader objective of boosting consumption by lowering the cost of essential services. With rising healthcare costs and growing demand for financial protection post-pandemic, insurance remains one of the fastest-growing segments. Lower premiums are expected to improve penetration, particularly in health, where affordability has been a barrier.

Industry executives acknowledge short-term challenges but agree the exemption will expand the market.

“Even without ITC, the benefit of GST exemption should lead to lower prices for consumers and expand the insurance base. We hope the regulator ensures a uniform approach across the sector,” said an industry representative.

The road ahead

As insurers prepare for system-level changes and recalibration of product pricing, today’s meeting will be crucial in ironing out operational issues.

For the government, the message is clear: GST exemptions must translate into real relief for consumers, and regulators must ensure strict compliance.

With the rollout deadline approaching, all eyes are on how insurers implement the new structure and whether the exemption results in reduced costs for policyholders as intended.