New Delhi/IBNS: The Goods and Services Tax (GST) rate on the premium paid on health and life insurance may be reduced as a proposal in this regard has been sent to the GST rate rationalisation committee, CNBC-Awaaz reported on Thursday (Aug 8) citing sources familiar with the development.

Sources told CNBC-Awaaz that the proposal talks about a 5 percent GST on health and life insurance premium, significantly lower than the current slab of 18 percent.

CNBC-Awaaz reported, quoting its sources, that the GST committee on rates is not in favour of fully exempting GST on premiums.

Shares of major insurance players - LIC, SBI Life, HDFC Life, and ICICI Prudential - have reacted positively to the news report, though India Blooms is yet to independently verify the development.

Members of the GST rate rationalisation committee are scheduled to meet on August 22, according to reports.

Earlier on July 28, union road, transport and highways minister Nitin Gadkari had written to Finance Minister Nirmala Sitharaman, seeking withdrawal of the 18 percent GST on life and medical insurance premiums, calling it a tax on the uncertainties of life.

“You are requested to consider the suggestion of withdrawal of GST on life and medical insurance premium on priority as it becomes cumbersome for the senior citizens,” Gadkari said in his letter to the finance minister.

Opposition parties under the Indian National Developmental Inclusive Alliance (I.N.D.I.A.) bloc too have staged protests in the Parliament seeking a rollback of the 18 percent GST on life and health insurance premiums.

The government has informed Parliament that around Rs 24,000 crore has been collected via GST on health and life insurance in the last three financial years, according to Moneycontrol.

“Several suggestions have come up and I shall take up with the GST council,” finance minister Nirmala Sitharaman said before the Parliament during the discussion on amendments to the Finance Bill.

The Finance Minister added that none of House members making demands for GST reduction have asked their respective FMs to reduce the GST on medical and life insurance, when the ball was in their court, as reported by Moneycontrol.

The FM said, “73-74 percent of the amount collected (from health and life premiums) under the GST goes to the states."