Gadkari urges removal of 18% GST on life and medical insurance premiums

Gadkari on Insurance: Union Minister of Road Transport and Highways, Nitin Gadkari, has formally requested Finance Minister Nirmala Sitharaman to withdraw the 18 per cent goods and services tax (GST) imposed on life and medical insurance premiums. In his letter, Gadkari described the GST as an undue burden on individuals seeking protection against life's uncertainties. This appeal comes in response to a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union.

Tax on Uncertainties of Life

Gadkari’s appeal highlights the financial strain that the 18 per cent GST places on policyholders, particularly senior citizens who find it challenging to manage these additional costs. He argued that taxing insurance premiums, which are essential for mitigating risks, is counterproductive and discourages people from purchasing necessary coverage.

Union’s Concerns and Recommendations

The memorandum submitted by the Nagpur Union also addressed several other key issues:

Differential Treatment of Life Insurance Savings: The Union has called for a reevaluation of how savings through life insurance are treated under the tax regime.

Reintroduction of Tax Deductions for Health Insurance: There is a push to reinstate income tax deductions for health insurance premiums, which were previously available and are considered beneficial for policyholders.

Consolidation of Public Sector Insurance Companies: The Union has suggested that consolidating public sector general insurance companies could enhance efficiency and service delivery.

Gadkari emphasised that the current GST rate makes insurance premiums increasingly burdensome, particularly for the elderly, and has urged Sitharaman to prioritise this issue.

Previous Appeals and Industry Reactions

This is not the first time the government has faced calls to reconsider the GST on insurance premiums. Earlier in June, the Confederation of General Insurance Agents' Associations of India petitioned for a reduction in GST on individual health policies from 18 per cent to 5 per cent. The Confederation argued that high GST rates, combined with rising premiums, are discouraging policy purchases and leading to lower renewal rates.

The Confederation believes that lowering the GST rate would make health insurance more affordable, encouraging greater uptake and ensuring that more people are covered.

The appeal by Gadkari and the Confederation's earlier request reflect growing concern about the impact of high GST rates on insurance affordability and accessibility. As the government considers these requests, the outcome will be pivotal in shaping the future of insurance policy uptake and financial protection for individuals across India.