The ministerial panel to decide on lowering goods and services tax (GST) on health and life insurance premiums will have its first meeting on October 19, officials said.

Currently, 18 per cent GST is levied on insurance premiums and there have been demands to either exempt or reduce the tax.

The GST Council in its meeting earlier this month decided to set up a 13-member GoM to decide on tax on health and life insurance premiums.

Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the GoM.

The panel includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. 

The GoM has been mandated to submit its report to the Council by October-end.

A final call by the council on taxation of insurance premiums is likely to be taken in the next meeting in November, based on the GoM report.

"The GoM on GST on insurance will meet on October 19 in Delhi," the official said.

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The terms of reference (ToR) of the panel also includes suggesting tax rate of health/medical insurance, including individual, group, family floater, and other medical insurance for various categories like senior citizens, middle class, persons with mental illness.

The ToR also include suggest tax rates on life insurance, including term insurance, life insurance with investment plans, whether individual or group and re-insurance.

Some Opposition-ruled states, including West Bengal, had demanded complete exemption of GST on health and life insurance premiums, while some other states were in favour of lowering the tax to 5 per cent.

Even Union Transport Minister Nitin Gadkari had in July written to Finance Minister Nirmala Sitharaman on the issue saying "levying GST on life insurance premium amounts to levying tax on the uncertainties of life".

In 2023-24, the Centre and states collected Rs 8,262.94 crore through GST on health insurance premium, while Rs 1,484.36 crore was collected on account of GST on health reinsurance premium.

Sitharaman in her reply to discussion on Finance Bill in the Lok Sabha in August had said that 75 per cent of the GST collected goes to states and the Opposition members should ask their state finance ministers to bring the proposal at the GST Council.

Out-of-Pocket Health Expenditure Dips

Citing government data released on Wednesday, PTI reported that the increase in government spending on health has led to a nearly 25 percentage point decrease in the share of out-of-pocket expenditure (OOPE) in the total health expenditure between 2014-15 and 2021-22.

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In per capita terms, the government health expenditure (GHE) has tripled from Rs 1,108 to Rs. 3,169 from 2014-15 to 2021-22, according to National Health Account (NHA) estimates for India 2020-21 and 2021-22.

The government spending on health between 2019-20 and 2020-21 increased by 16.6 per cent, while between 2020-21 and 2021-22, it grew by an unprecedented rate of 37 per cent, highlighting the proactive role played by the government in tackling the COVID-19 pandemic, the health ministry said.

The increase in government spending on health has an important implication for the reduction of financial hardship endured by households, it stated.

"In the total health expenditure of the country between 2014-15 and 2021-22, the share of GHE has increased from 29 per cent to 48 per cent.

During the same period, the share of OOPE in the total health expenditure declined from 62.6 per cent to 39.4 per cent," the data stated.