Union Minister of Road Transport and Highways Nitin Gadkari has called for the abolition of the 18% Goods and Services Tax (GST) on life and medical insurance premiums. In a letter dated July 28 to Finance Minister Nirmala Sitharaman, Gadkari argued that imposing GST on these premiums essentially equates to taxing the uncertainties and risks associated with life, which, in turn, hampers the growth of the insurance sector.
Gadkari highlighted that the current GST rate of 18% on both life and medical insurance premiums represents a significant financial burden, especially for senior citizens who are more reliant on insurance for their security and well-being. "You are requested to consider the suggestion of withdrawal of GST on life and medical insurance premiums on priority as it becomes cumbersome for the senior citizens," Gadkari stated in his letter.
He pointed out that the GST on medical insurance premiums acts as a major deterrent to the expansion of this critical segment of the insurance industry, which is essential for public welfare. According to Gadkari, the high tax rate on insurance premiums not only places an additional financial strain on individuals seeking to protect themselves and their families but also stifles the potential for growth in a sector that plays a vital role in managing health and life risks.
The minister’s appeal came in response to a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union. The union raised concerns about the challenges faced by the insurance industry, including the negative impact of the GST on the affordability and accessibility of insurance products. Gadkari conveyed the union's argument that taxing life insurance premiums effectively means taxing the very uncertainties that insurance aims to mitigate. "Levying GST on life insurance premiums amounts to levying tax on the uncertainties of life," Gadkari emphasized. He echoed the union’s sentiment that individuals who invest in insurance to safeguard their families against life's uncertainties should not be penalized with additional taxes on their premiums.
Furthermore, the union's memorandum brought to light issues such as the unequal treatment of savings through life insurance, the need for the reintroduction of income tax deductions for health insurance premiums, and the potential benefits of consolidating public sector general insurance companies. These points reflect broader concerns about the structure and effectiveness of the current insurance and tax policies.
The GST Council, the body responsible for overseeing and making decisions on tax matters in India, is set to convene in August. The council’s previous meeting took place on June 22. Gadkari’s request for the removal of GST on insurance premiums underscores ongoing debates about how best to balance tax policy with the need to support and grow the insurance sector, ensuring that it remains accessible and beneficial to all segments of the population.
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