Union Minister of Road Transport and Highways Nitin Gadkari has asked Finance Minister Nirmala Sitharaman to eliminate the 18% GST on life and medical insurance premiums. He claims that this tax adds to the uncertainty of life and stifles the sector's growth. In a letter dated July 28, Gadkari said, "You are requested to consider the suggestion of withdrawing GST on life and medical insurance premiums on priority as it becomes cumbersome for senior citizens."
Life and Medical Insurance Premiums are subject to an 18% GST
The letter continued: "Similarly, the 18 per cent GST on medical insurance premiums is proving to be a deterrent for the growth of this segment of business which is socially necessary." The letter addressed concerns voiced by the Nagpur Divisional Life Insurance Corporation Employees Union, which had provided the minister with a memorandum describing the industry's challenges.
According to the document, levying GST on life insurance premiums is like taxing life's uncertainties. The Union believes that the individual who covers the risk of life's uncertainties to provide some security for the family should not be taxed on the price paid to obtain coverage against this risk."
The minister added that the union raised concerns about the uneven handling of savings through life insurance, the reintroduction of income tax deductions for health insurance premiums, and the merging of public sector general insurance companies. The GST Council, which makes tax decisions, is expected to meet in August. The latest meeting was held on June 22.
Nirmala Sitharaman has already faced requests to review the GST rate on health insurance premiums. Earlier this year, in June, the Confederation of General Insurance Agents' Associations of India recommended the government to decrease the 18% GST on individual health insurance premiums to 5%. The association, which represents non-life insurance agents, said that a lower GST rate would encourage the purchase of these products as a kind of social security. They also noted that health insurance rates had virtually doubled in the last five years.
