Union Minister Nitin Gadkari is known for his outspokenness. He has demanded from his own government to withdraw the GST levied on life and medical insurance premiums. In a letter to Finance Minister Nirmala Sitharaman, Gadkari said that this step will reduce the tax burden on insurance companies and will boost the demand for important insurance products in the country. Writing a letter to Sitharaman on behalf of Nagpur LIC Union, Gadkari said that the indirect tax imposed on life insurance premium is like imposing tax on the uncertainties of life. Currently, GST is levied on life and medical insurance premiums at the rate of 18 percent.
Transport Minister Gadkari said in a letter to Sitharaman that the Nagpur Divisional Life Insurance Corporation Employees Union, Nagpur has handed me a memorandum regarding the issues related to the insurance industry and demanded to raise it before you. The main issue raised by the union is related to the withdrawal of GST on life and medical insurance premium. Imposing GST on life insurance premium is like imposing tax on the uncertainties of life. The union believes that the person who covers the risk of uncertainties of life to give some security to the family, his premium should not be taxed. Similarly, 18% GST on medical insurance premium is proving to be a hindrance to the growth of this business.
Committee’s recommendation
A recent ADB report claimed that India ranks lowest among Asia Pacific countries in terms of health insurance for the elderly. This clearly shows that there is a need to increase universal health coverage in the country. Gadkari said that the government should consider the suggestion to withdraw GST on life and health insurance premiums on a priority basis. The parliamentary panel on GST for insurance products has recommended that there is a need to rationalize GST on insurance products, especially health and term insurance. The panel also suggested that the RBI can issue ‘on-tap’ bonds on behalf of the government to meet the capital requirements of the insurance industry. It is estimated to be Rs 40-50,000 crore.
