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GST on Health and Term Insurance: Former BJP President and Union Road Transport Minister Nitin Gadkari has written a letter to Finance Minister Nirmala Sitharaman demanding exemption from GST on payment of life insurance and medical insurance premium. He has demanded the Finance Minister to remove GST on life and medical insurance.
Currently, there is a provision of 18 percent GST (Goods and Services Tax) on life and medical insurance. But this is not the first time that questions have been raised about the heavy GST on health and life insurance products. In February 2024 of the same year, in the 17th Lok Sabha, the Standing Committee attached to the Ministry of Finance recommended the government to rationalize the GST rate levied on insurance products, especially health and term insurance premiums.
GST rate on insurance premium should be reasonable
Jayant Sinha, who was the Minister of State for Finance in the first term of the Modi government, was the chairman of the Standing Committee of Parliament in the second term. The Standing Committee headed by Jayant Sinha, in its report submitted on February 6, 2024 this year, recommended the government to rationalize the GST levied on insurance products, especially health and term insurance.
18% GST is levied on these insurance products. The committee said that due to high GST rate, the burden of premium increases, due to which people shy away from taking insurance policies.
Advocacy for reducing GST rates
In its report submitted to the government, the Jayant Sinha-led committee said that the committee believes that to make insurance affordable, it recommends the government to reduce GST rates on health insurance products and term insurance policies. In particular, GST rates applicable on senior citizens and microfinance policies up to Rs 5 lakh (there is a limit in the Ayushman Bharat scheme) should be reduced.
A medical bill is a far cry from pushing you into poverty
In its recommendations, the standing committee said, insurance products in the modern economy provide security as well as risk management to individuals and enterprises. Insurance provides protection of life, health and property to citizens, provides financial support to the dependents of policyholders and also provides a safety net for low-income groups. Many people in the country are just one medical bill away from sliding into poverty, so insurance products with affordable premiums and cashless settlement facilities will encourage more people to take health insurance, the committee said in its report.