The 54th meeting of the GST Council is going to be held today. In this meeting chaired by Finance Minister Nirmala Sitharaman, a big decision is expected to be taken after considering the reduction of 18% GST on life and health insurance.
The 54th meeting of the GST Council is going to be held today under the chairmanship of Finance Minister Nirmala Sitharaman. Many important issues can be discussed and decisions can be taken in this. Along with the tax on small transactions less than Rs 2000 and online gaming, there is every possibility of considering an important issue, about which Union Road and Transport Minister Nitin Gadkari in the Modi 3.0 government at the Center has also expressed concern. We are talking about the tax on life and health insurance premium (Insurance Premium GST), in which a reduction can be considered today.
Nitin Gadkari had said this big thing
In the GST Council meeting to be held on Monday under the leadership of Finance Minister Nirmala Sitharaman, most eyes are on the announcement related to reducing the 18% GST on health and life insurance premium. There has been a demand for this from common people to the elite. On 28 July 2024, Union Minister Nitin Gadkari also wrote a letter to the Finance Minister demanding the removal of GST (GST on Insurance) applicable on life and medical insurance. He has termed this tax as ‘like imposing a tax on the uncertainties of life’.
In his letter to Sitharaman, Gadkari had said that the Nagpur Mandal Jeevan Bima Nigam Employees Union has submitted a memorandum to him on these issues. The union believes that insurance premium should not be taxed to enable people to buy cover against this risk. He said that similarly, 18 per cent GST on medical insurance premium is proving to be a hindrance to the growth of this sector of business, which is socially important.
Will policyholders benefit from reduction in GST?
If Nitin Gadkari’s demand is accepted in the GST Council meeting to be held today, then life and medical insurance can become cheaper, because GST on insurance increases the amount of your premium and you have to spend more. But the question is also being raised whether policyholders will get the benefit of this. In fact, a report by Business Today has expressed concern that if the Council reduces GST, then insurers can keep the financial benefits to themselves instead of giving relief to customers. If reports are to be believed, there can be a consideration of reducing the GST rate on health and life insurance premium from 18 to 5 percent.
GST is levied as a financial service
The Goods and Services Tax (GST) that was implemented across the country on 1 July 2017 has brought about a major change in India’s tax system and since then a single tax is levied in place of multiple taxes across the country. GST is an indirect tax which is levied on household products, clothing, consumer goods, electronics, transport, real estate as well as services. Insurance is also considered a financial service and is included in this category. GST is levied at the same rate of 18% on both term insurance and medical insurance.
How premium increases your pocket expenses
Talking about term and health insurance, GST is applicable on the total premium amount. Understand it as an example, if you buy a health insurance policy and its coverage is Rs 5 lakh, then the premium cost is around Rs 11,000 per year. Now if we calculate the GST levied on it at the rate of 18 percent, then [11000/(100 + 18%)] means you have to pay an additional Rs 1980 as GST on every premium and your premium becomes Rs 12,980. In this way, after the implementation of GST, policy buyers who buy term policy have to pay a higher premium amount.
Let us tell you that before GST
, 15% tax was levied on insurance, but after the implementation of GST, 18% is being charged from July 1, 2017. This increase of 3% in the tax rate has had a direct impact on the premium of insurance policies, due to which the premium prices increased. Let us tell you here that in the GST Council meeting, along with the discussion on reducing the tax on insurance premium, the side effects on the revenue obtained from it can also be considered. In fact, in the financial year 2023-24, the Center and the states earned Rs 8,262.94 crore through health insurance premium. Apart from this, they earned Rs 1,484.36 crore from health re-insurance premium.
