The GST fitment committee has estimated that exempting the levy on life insurance could lead to a ₹200-crore revenue loss per annum.

The assessment of the panel will be placed before the GST Council in its September 9 meeting, sources said.

All types of health and life insurance policies attract 18 per cent GST.

The fitment committee consists of state and central revenue officials who review proposals to change GST rates.

Nitin Gadkari, Union minister for road, transport and highways, had written to finance minister Nirmala Sitharaman to withdraw the GST on life and medical insurance premiums.

Bengal finance minister Chandrima Bhattacharya had also pitched for a cut in the 18 per cent tax on life and health insurance premiums earlier this month during the rate rationalisation committee’s meeting.

In his letter to Sitharaman last week, Derek O’Brien also asked her to remove the levy.

Rajat Mohan, executive director of tax consultancy firm MOORE Singhi, said: “If the government were to implement such a tax exemption, it is crucial that insurance companies pass on the benefits to policyholders in the form of reduced premiums. While there may be concerns about the impact on tax collections, the long-term benefits of increased financial security and a more robust insurance market could outweigh the immediate revenue considerations,” he added.

A parliamentary committee headed by former minister of state for finance, Jayant Sinha, has said there is a need to rationalise the GST on insurance products, especially health and term insurance. It also suggested that the RBI may issue ‘on-tap’ bonds to meet the capital requirements of the insurance industry, which are pegged at ₹40,000–50,000 crore.