Government-sponsored crop insurance schemes such as Pradhan Mantri Fasal Bima Yojana and Restructured Weather-Based Crop Insurance Scheme, which are also backed by government subsidies, are exempt from this levy.
“Keeping in view the overall objective of ‘Insurance for All by 2047’, as well as the affordability level and purchasing power of the rural population, it would be desirable to extend similar support to all rural-centric and parametric products covering agri and allied risks,” Lavanya Mundayur, chairman and managing director of public sector firm Agriculture Insurance Company Ltd, told ET.
The GST Council, in its meeting in December 2024, deferred a decision on reducing taxes on health and life insurance.
A group of ministers, mandated by the GST Council to look into taxation of insurance, has recommended removing the GST on insurance premiums paid for term life insurance policies and premiums paid by senior citizens towards health insurance.
However, it proposed that 18% GST continue to be levied on premiums paid for policies with health insurance cover of more than ₹5 lakh. The next GST Council meeting is yet to be scheduled.
India’s overall insurance penetration dropped to 4% in 2022-23 from 4.2% in 2021-22, as per the latest available data. Over this period, life insurance penetration fell to 3% from 3.2%. The non-life insurance sector remained unchanged at 1%.
Mundayur said that in order to further drive insurance penetration in the agricultural and rural segment, a basic standard vanilla cover, linked to crop yields, can be developed and, depending on geography and other state and central government subsidies, further add-ons can be incorporated.
She said the insurer is in the process of partnering with banks, microfinance institutions, agri-techs and input suppliers for developing bundled insurance products for agriculture and allied activities. One of the focus areas for AIC is parametric insurance, which holds immense potential in addressing climate-induced agricultural risks in a faster, more transparent and cost-effective manner, she added.
