Demand to Withdraw 18% GST on Health and Life Insurance Premiums Grows
Trinamool Congress (TMC) leader Derek O’Brien has called on Finance Minister Nirmala Sitharaman to urgently reevaluate and eliminate the 18% GST on health and life insurance premiums ahead of the upcoming GST Council meeting.
In a letter dated August 24, O’Brien emphasized the need to withdraw this tax at the 54th GST Council meeting, highlighting its significant burden on approximately 450 million middle-class Indians.
“The 18% Goods and Services Tax on health and life insurance premiums is a serious financial strain,” O’Brien stated, underscoring that these insurance products are essential for providing financial security during times of distress such as illness, accidents, or untimely death. He urged the government to ensure that all segments of society can afford this vital social safety net.
O’Brien raised concerns that the high GST rate might discourage citizens from purchasing insurance policies or may lead existing policyholders to forego renewals, adversely affecting public welfare, particularly for the middle class.
The issue has been a concern among TMC and several opposition parties in Parliament, with West Bengal Chief Minister Mamata Banerjee having previously written to the Finance Minister advocating for the rollback of GST on insurance premiums.
O’Brien also referenced a letter from Union Road Transport and Highways Minister Nitin Gadkari, which detailed concerns from the Nagpur Division Life Insurance Corporation Employees’ Union that submitted a memorandum outlining industry challenges.
“On August 6, 350 MPs from 20 different political parties protested against this issue in Parliament,” stated O’Brien, reiterating the widespread discontent. He mentioned that the Union Minister had communicated with the Finance Minister regarding these concerns.
In a significant move, the Standing Committee on Finance, in its 66th report submitted to Parliament in February 2024, recommended a reduction in GST rates on health insurance products, particularly targeting retail policies for senior citizens and microinsurance policies under the Pradhan Mantri Jan Arogya Yojana. This is aimed at making insurance more accessible and affordable.
O’Brien urged the government to heed these recommendations, especially in light of the Insurance Regulatory and Development Authority of India’s goal of ‘Insurance for All’ by 2047, which can only be achieved by eliminating the burdensome 18% GST on health and life insurance.
The composition of the GST Council is pivotal, with the Union government holding a significant one-third weightage of votes. O’Brien noted that passing any resolution requires a three-fourths majority, and since the NDA is in power in 22 states, any proposal rejected by the Union government would be effectively stalled. He questioned what impedes the ruling party from endorsing these necessary changes through the GST Council.
“It is urgent that this matter be reviewed during the 54th GST Council meeting on September 9, 2024, and that the government withdraw the 18% GST on health and life insurance premiums,” O’Brien urged.
The call for the removal of GST on life and health insurance premiums has been echoed by several opposition parties in the Lok Sabha. RSP MP NK Premachandran also sought an amendment to eliminate the 18% GST on medical and life insurance premiums during the Finance Bill discussion, although the amendment was not considered, leading to a walkout by many opposition parties from the Lower House.
Sitharaman, who guided the Finance Bill, remarked that any amendments to GST rates would require the approval of the GST Council.
