Transport Minister Nitin Gadkari has asked Finance Minister Nirmala Sitharaman to withdraw the 18% GST on life and medical insurance premiums. In a letter dated July 28, which came to light today, Gadkari argues that levying GST on life insurance premiums is akin to levying tax on life's uncertainties and that this tax hinders the insurance sector's growth.
“You are requested to consider the suggestion of withdrawal of GST on life and medical insurance premium as a priority as it becomes cumbersome for senior citizens as per rules with due verification,” read the letter sent by Gadkari to Sitharaman.
Citing issues raised by the Nagpur Divisional Life Insurance Corporation Employees Union, Gadkari highlighted that an individual who purchases life insurance or medical insurance intends to protect herself and her family from the risk of uncertainties of life. Therefore, individuals should not be charged GST on premiums for coverage against such risks.
In the memorandum submitted by the employees’ union to the Nagpur MP, the former also raised other concerns about the insurance industry including differential treatment of savings through life insurance, reintroducing income tax deductions for health insurance premiums and consolidation of public and sector general insurance companies.
Currently, an 18% GST is levied on premiums for all types of life and medical insurance policies. The Minister added that such a high GST rate on medical insurance premiums is turning out to be "a deterrent to the growth of this segment of business which is socially necessary". While in the past the insurance industry had pushed for a reduction in these tax rates, Nitin Gadkari has advocated for a complete removal of GST on life and medical insurance premiums.
Deliberation on GST rates is taken up by the GST Council, a constitutional body responsible for GST implementation in India. The council includes the Union Finance Minister, Union Minister of State of Revenue and Ministers nominated by states. The Council last met on June 22 and is expected to reconvene in August.
