GST Exemption News: GST Council may lower tax rates on health insurance

GST Exemption News:  When an opposition Indian MP called on Finance Minister Nirmala Sitharaman to exempt life and health insurance from Goods and Services Tax, she cited several factors linked to GST on insurance products. She said, “I would like to make two key points: there was already a tax on health insurance even before GST was introduced. Even before GST was introduced, there was already a tax on health insurance. This is not a new issue, it exists in every state.”

The demand for the abolition of indirect taxes on health insurance came into the limelight when one of her colleagues, Transport Minister Nitin Gadkari, made a similar demand in a letter. Finance Minister Sitharaman later said the letter was not intended for the general public. But in a country with high income disparities, inequality and a growing healthcare infrastructure, Indians are debating why they should be taxed on something they consider necessary: ​​healthcare. Insurance penetration in India is much lower than in many other countries, and taxes are an additional cost if citizens want to buy health insurance.

India imposes 18% GST on insurance products

According to the Niti Aayog report, 30% of the population around 40 crore Indians, still lack financial coverage for health. The Economic Survey projects that insurance penetration, measured as a percentage of GDP, will increase from 3.8% in FY23 to 4.3% in FY35. At the same time, life insurance premiums are expected to rise by 6.7% annually from 2024 to 2028. This growth is driven by increasing demand for term life insurance, a growing younger population and advances in.

Shilpa Arora told, that “18% GST on premiums is not justified. Insurance products are purchased to protect families against financial loss due to premature death and illness. “If IRDAI talks about insurance for all by 2047, the government should reduce GST and make premiums more affordable.”

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Shilpa Arora echoed this view and said the government’s reduction in GST on premiums would also lead to lower premiums. She said, “In life insurance, while buying an endowment product, a customer pays fifty nine thousands as premium, but the investment amount is calculated as fifty thousand with other mortality expenses and expenses and Rs 9 thousand is the GST portion.”

The policyholder calculates the sum of the amount paid and the return received, which results in a lower return. He often feels cheated and loses faith in the insurance product. “There has been a massive increase in health insurance premiums and we have received many complaints from policyholders seeking relief. There is not much we can do here, but the government can definitely help by reducing the GST rate.”