The premiums on health and life insurance could go down if the GST Council in its meeting later this month accepts the recommendation of a rate rationalisation committee.

Sources have indicated the panel favours a uniform 5 per cent rate on these premiums down from the existing 18 per cent.

However, the panel was not inclined to a complete abolition of the levy as it would have revenue implications for both the Centre and states.

Health and life insurance premiums attract an 18 per cent GST, a rate introduced when the tax regime replaced the service tax in 2017. This has led to higher premium costs for policyholders compared with the previous 15 per cent service tax.

The move to reduce the GST rate follows growing pressure from several quarters.

In her reply to the Finance Bill in the Lok Sabha, finance minister Nirmala Sitharaman said nearly 74 per cent of the GST collected from premiums goes back to the states.

Firstly, 50 per cent of the proceeds go to the states and 50 per cent to the Centre. Second, 41 per cent of the collections of the Centre are distributed to the states, taking their share to 73-74 per cent.

A parliamentary committee headed by former minister of state for finance Jayant Sinha has recommended the GST panel rationalises the GST on insurance, especially health and term insurance.

It suggested the RBI issue ‘on-tap’ bonds to meet the capital requirements of the industry,