GST Council May Consider Input Tax Credit on Employee Insurance Premiums

The GST Council is expected to consider a proposal to allow employers to claim input tax credit (ITC) on GST paid for insurance policies provided to their employees at its meeting on October 7.

Under the current Goods and Services Tax framework, individuals purchasing life or health insurance for themselves or their families are eligible for GST exemption. However, when companies purchase insurance coverage for employees, GST is currently levied and businesses are generally unable to claim input tax credit on the premium.

At present, an 18% GST is applicable to group life and health insurance policies purchased by employers. The proposed change could allow businesses to offset the tax paid on such premiums through ITC, potentially reducing the overall cost of providing insurance coverage to employees.

Sources said the move could make employee insurance more affordable for employers and encourage wider coverage across the organised workforce. Since group insurance is a common employee benefit offered by organised-sector companies, lower costs could also support greater adoption of insurance products.

The proposal, if approved, could have implications for both employers and the insurance industry by reducing the effective cost of providing employee health and life cover.

Source: PTI