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Union Road Transport and Highways Minister Nitin Gadkari has sparked a debate within the Indian government by calling for the removal of Goods and Services Tax (GST) on life and health insurance premiums. In a letter to Finance Minister Nirmala Sitharaman, Gadkari argued that the current GST levied on insurance premiums amounts to a tax on the uncertainties of life, which is a burden on individuals, particularly senior citizens. He expressed concern that the 18% GST on medical insurance premiums hinders the growth of the sector, a sector deemed essential for societal well-being.
Gadkari's stance highlights the growing concerns surrounding the impact of GST on the insurance industry. While the government implemented GST in 2017 to simplify the tax system and bring uniformity, the 18% levy on insurance has been criticized by various stakeholders, including insurance companies and consumers. The argument is that the GST on insurance premiums, especially for life and health insurance, adds to the overall cost of coverage, discouraging individuals from seeking adequate financial protection.
The government, however, is not expected to immediately respond to Gadkari's request. While there have been discussions on rationalizing GST rates and potentially merging slabs, a complete removal of the tax is unlikely. Such a move would deprive insurance service providers of tax credits, creating a complex situation. The final decision on GST rates will be made by the GST Council, following the submission of a report by a ministerial group headed by Bihar Deputy Chief Minister Samrat Chaudhary. The upcoming months are likely to see further debate and discussions on the issue of GST on insurance premiums, with stakeholders pressing for a more consumer-friendly approach to the crucial sector of financial security.
Source: Insurance premium GST is like tax on life's uncertainties: Nitin Gadkari