18% GST on health insurance: FM Sitharaman addresses issue in the Lok Sabha

Union Finance Minister Nirmala Sitharaman on Wednesday addressed the issue of 18 per cent Goods and Services Tax (GST) on health insurance. Sithraman was replying to the opposition bloc in Lok Sabha who cited Union Minister Nitin Gadkari's letter to demand removal of GST on health and life insurance.

Since the letter came in public via someone else, they protested in the Parliament with 200 MPs to demand removal of GST, the FM said.

Sitharaman said, "I want to raise two important points - tax has been there on medical insurance even before the introduction of GST. There was already a pre-GST tax on medical insurance, before the GST was introduced. This is not a new issue, it was already there in all the states. Those protesting here... did they discuss regarding the removal of this tax in their states?"

Nitin Gadkari had urged the finance minister to withdraw the Goods and Services Tax on premiums paid for life and medical insurances, a move that will lessen the tax burden on insurers and likely boost the crucial insurance products' demand in the world's most populous country.

While writing to Finance Minister Nirmala Sitharaman on behalf of Nagpur LIC union, Gadkari had said the indirect tax levied on life insurance premium amounts to levying tax on the uncertainties of life.

 

"Nagpur Divisional Life Insurance Corporation Employees Union, Nagpur, has submitted me a memorandum about the issues pertaining to the Insurance Industry and sought to take up them with your goodself. Main issue raised by the Union is related to withdrawal of GST on Life and Medical Insurance Premium," the Transport Minister had said.

In India, insurance and pension fund assets represent 19% and 5% of GDP, respectively. In contrast, these figures stand at 52% and 122% in the USA, and 112% and 80% in the UK, highlighting substantial growth potential in India.

According to Economic Survey, insurance penetration as a share of GDP is anticipated to increase from 3.8% in FY23 to 4.3% by FY35. Meanwhile, life insurance premiums are projected to grow at an annual rate of 6.7% from 2024 to 2028, fueled by rising demand for term life coverage, a youthful demographic, and advancements in Insurtech.

Moreover, Gadkari in the letter had raised the union's concern on differential treatment to savings by way of Life Insurance, re-introduction of IT deduction for health insurance premium and consolidation of public and sector general insurance companies.

"In view of the above, you are requested to consider the suggestion of Withdrawal of GST on Life and Medical Insurance Premium on priority as it becomes cumbersome for the senior citizens as per rules with due verification along with other relevant points raised," said Gadkari to Sitharaman.

Source:: The Economic Times,  dated 07/08/2024.