GST On Health & Term Insurance: Former BJP President and Road Transport Minister in the Central Government, Nitin Gadkari has written a letter to Finance Minister Nirmala Sitharaman to remove GST on payment of premium of Life Insurance and Medical Insurance. He has demanded from the Finance Minister to remove GST on life and medical insurance.
Currently, there is a provision of 18 percent GST (Goods & Services Tax) on life and medical insurance. But this is not the first time that questions are being raised about the huge GST on health and life insurance products. In February 2024 this year, the Standing Committee attached to the Ministry of Finance in the 17th Lok Sabha had recommended the government to rationalize the GST rate on insurance products and especially the premium of health and term insurance.
GST rate on insurance premium should be rational
Jayant Sinha, who was the Minister of State for Finance in the first term of the Modi government, was the chairman of the Parliament Standing Committee of Finance in the second term. The Standing Committee headed by Jayant Sinha, in its report submitted on 6 February 2024 this year, recommended the government to rationalize the GST on insurance products, especially health and term insurance. 18 percent GST is levied on these insurance products. The committee said, due to the high rate of GMT, the burden of premium increases, due to which people shy away from taking insurance policies.
Advocacy for reduction in GST rate
The committee headed by Jayant Sinha said in its report submitted to the government, the committee believes that to make insurance affordable, it recommends to the government that the GST rates on health insurance products and term insurance policies should be reduced. Especially, GST rates on senior citizens and microfinance policies up to Rs 5 lakh (the limit of Ayushman Bharat Yojana) should be reduced.
One medical bill away from being pushed into poverty
In its recommendations, the standing committee said, in the modern day economy, insurance products provide protection to individuals and enterprises and manage risks. Insurance provides protection for life, health and assets to citizens which provides financial support to the dependents of the policyholders as well as a safety net for the low-income group. In its report, the committee said, many people in the country are just one medical bill away from slipping into poverty. In such a situation, insurance products with affordable premiums and cashless settlement facility will encourage more and more people to take health insurance.
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