The GST rate on the premium paid on health and life insurance could be reduced soon, according to a report by CNBC-Awaaz. The report states that a proposal in this regard has been sent to the GST rate rationalisation committee.
The proposal mentions a 5 per cent GST on health and life insurance premiums which would be significantly lower than the current rate of 18 per cent, a report by CNBC-Awaaz states.
The GST rate on the premium paid on health and life insurance could be reduced soon, according to a report by CNBC-Awaaz. The report states that a proposal in this regard has been sent to the GST rate rationalisation committee.
This proposal mentions a 5 per cent GST on health and life insurance premiums. This would be significantly lower than the current rate of 18 per cent. “The GST committee on rates is not in favour of fully exempting GST on premiums,” the report states. It also mentions that members of the GST rate rationalisation committee are set to meet on August 22.
Earlier, Finance Minister Nirmala Sitharaman had lashed out at Opposition leaders calling for the removal of Goods and Services Taxes (GST) on medical insurance premiums. “This is their double standards, this is their drama,” she said while replying to a debate on Finance Bill (No. 2) 2024 in the Lok Sabha on August 7.
Recently, political leaders across various parties (BJP included) stood up in support of doing away with GST on medical and life insurance premiums while the industry has long since kept calling for a reduction in the same.
Currently, the government has set 18 per cent GST on life and medical insurance premiums.
Criticising the opposition leaders, Sitharaman stated that leaders raising objections should first have consulted their state finance ministers who have a say in the GST Council before uproaring a drama over the matter in Lok Sabha.
The finance minister said that tax had been levied on medical insurance even before the introduction of GST. "There was already a Service Tax on medical insurance before the GST was introduced. This is not a new tax, it was already there in all the states," she stated.
“Did they write to the Finance Ministers of their respective states about it and ask them to raise it in the GST Council where states have 2/3rd part? No, but they are protesting here. This is their double standards, this is their drama," Sitharaman stated.
For the unversed, the issue was not raised by opposition leaders first. BJP leader and Union Minister for Road Transport and Highways Nitin Gadkari wrote a letter to the finance minister on July 28 seeking the removal of GST on medical and life insurance premiums.
In this letter, Gadkari wrote that imposing GST on life insurance premiums equals levying tax on the ‘uncertainties of life.’ The Minister penned the letter on the suggestions from the Nagpur Divisional Life Insurance Corporation Employees Union regarding this tax, requesting Sitharaman to roll back the same.
Like fire in the forest, the matter was quickly caught on by many opposition leaders who took charge and demanded the finance minister remove this tax on medical premiums.
Opposition leader Rahul Gandhi, West Bengal CM Mamata Banerjee, Congress MP Karti Chidambaram, Samajwadi Party MP Rajeev Kumar Rai, and RJD MP AD Singh, among others, have so far supported this demand.
“This GST is bad because it adversely affects the people's ability to take care of their basic vital needs," the West Bengal CM said in a post on social media platform X (formerly Twitter).
There was more!
In addition to the removal of GST, Gadkari had also raised issues related to Differential Treatment to Savings by way of Life Insurance, the re-introduction of the IT deduction for health insurance premiums, and the consolidation of public and sector general insurance companies. However, these demands have not caught as much traction as GST.
The issue is gaining traction amid the reports that the GST council is set to reconvene this month. The last meeting took place on June 22.
“Premiums have always been a key deciding factor for policyholders. The imposition of 18 per cent GST on insurance premiums, however, acts as a significant deterrent to insurance purchase and penetration,” Rakesh Jain, CEO, of Reliance General Insurance stated speaking to Outlook Money.
On the part of policyholders, “the added tax liability is an obstacle for some, especially if they are already watching their budget closely,” Jain says. He further adds that the removal of GST could encourage more people to invest in insurance, potentially boosting the growth in insurance penetration and creating a more financially secure nation.