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Nitin Gadkari's letter to FM Nirmala Sitharaman: While some people have welcomed the first Union Budget of the third term of the NDA government led by Prime Minister Narendra Modi, many people have also expressed displeasure. Union Minister and senior BJP leader Nitin Gadkari himself has written a letter to Finance Minister Nirmala Sitharaman over the non-announcement of many expected provisions.
Union Road and Transport Minister Nitin Gadkari has written a letter requesting to cancel GST on the premium of life insurance and health insurance schemes. Nitin Gadkari has written in the letter that “I am writing a letter to the Finance Minister after the memorandum of Nagpur Division Life Insurance Corporation Employees Union. In which GST has been demanded on life insurance and health insurance premium.
18 per cent GST is levied on life insurance and health insurance premium. While levying GST on life insurance premium is tantamount to taxing the uncertainties of life…” It further said that 'the employees union is of the opinion that a person who is buying insurance to cover the risks of uncertainties of life for the protection of his family, it is not worth levying tax on his premium.'
According to Gadkari, the employees union further said, “Similarly, 18% GST on health insurance premium is proving to be a challenge in the growth of this business. However, this business is socially necessary… so the employees' unions are demanding the imposition of GST on it and request for withdrawal.”
During the meeting, the employees union raised issues related to conflict of interest on savings through life insurance, re-introduction of income tax deduction for health insurance premium and merger of public and general insurance companies. In a letter to Nirmala Sitharaman, Nitin Gadkari further wrote, “Keeping in view the above, you are requested to consider the proposal to remove GST on life insurance and health insurance premium on priority basis…”
How does the premium cost increase?
GST is applicable on the total premium amount of term and medical insurance. If you buy a medical insurance policy and its coverage is Rs. 5 lakh, then the premium cost is approximately Rs. 11,000 per year. If GST is calculated on this at the rate of 18 percent, then it will be [11000/(100 + 18%)] That is, on each premium you will have to pay GST of Rs. 1980 additional amount will have to be paid and your premium will become Rs. 12,980. Thus, after the implementation of GST, the burden on health insurance buyers increases by Rs. 1980.