TMC leader and Rajya Sabha MP Derek O'Brien has written to Finance Minister Nirmala Sitharman demanding the withdrawal of Goods and Services Tax (GST) on health, life insurance premiums at the upcoming GST council meet. O'Brien called the 18% Goods and Services Tax (GST) on health and life insurance premiums a "burden on 45 crore Indians comprising the middle-class" in his letter to the Finance Minister. He has asked the FM to "urgently" review the matter at the 54th meeting of the GST Council which is scheduled for September 9.
"These insurance schemes provide financial security during times of distress, may it be an illness, accident, or untimely death. It is our collective responsibility to ensure that all sections of society are able to afford this crucial social safety net." You Might Also Like: 18% GST on health insurance: FM Sitharaman addresses issue in the Lok Sabha He said, levying a high GST rate on health and life insurance may lead to many citizens not opting for insurance schemes, or even existing policy holders not renewing their policies.
"The public at large, and especially the middle-class, has been severely impacted by this." The Union Minister of Road Transport and Highways also wrote a letter to you on this issue, said the TMC leader. Reducing GST rates has also been endorsed by the Standing Committee on Finance in its 66th Report submitted to Parliament in February 2024, he said.
Quoting the report he said, "The Committee, with a view to make insurance more affordable, recommend that GST rates applicable to health insurance products, particularly retail policies for senior citizens and microinsurance policies (up to limits prescribed under PMJAY), and term policies may be reduced." You Might Also Like: Indians may need to get over a tax headache to secure their health The Union government must take cognizance of all these, said O'Brien . "The Insurance Regulatory and Development Authority of India has set the target of "Insurance for All" by 2047.
The only way to achieve this is by repealing the exorbitant 18% GST rate on health and life insurance." Nitin Gadkari had also urged the finance minister to withdraw the GST on premiums paid for life and medical insurances, a move that will lessen the tax burden on insurers and likely boost the crucial insurance products' demand in the world's most populous country. While writing to Finance Minister Nirmala Sitharaman on behalf of Nagpur LIC union, Gadkari had said the indirect tax levied on life insurance premium amounts to levying tax on the uncertainties of life.
In India, insurance and pension fund assets represent 19% and 5% of GDP, respectively. In contrast, these figures stand at 52% and 122% in the USA, and 112% and 80% in the UK, highlighting substantial growth potential in India. According to Economic Survey, insurance penetration as a share of GDP is anticipated to increase from 3.
8% in FY23 to 4.3% by FY35. Meanwhile, life insurance premiums are projected to grow at an annual rate of 6.
7% from 2024 to 2028, fueled by rising demand for term life coverage, a youthful demographic, and advancements in Insurtech. Moreover, Gadkari in the letter had raised the union's concern on differential treatment to savings by way of Life Insurance, re-introduction of IT deduction for health insurance premium and consolidation of public and sector general insurance companies. "In view of the above, you are requested to consider the suggestion of Withdrawal of GST on Life and Medical Insurance Premium on priority as it becomes cumbersome for the senior citizens as per rules with due verification along with other relevant points raised," said Gadkari to Sitharaman.
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