Will health and life insurance become more affordable soon? If so, how will it be? Policyholders have always had these questions. prompted by yesterday's developments in Parliament during the Monsoon Session.
On August 7, 2024, Finance Minister Nirmala Sitharaman addressed concerns in parliament regarding the 18% Goods and Services Tax (GST) on life and health insurance premiums. The union minister presents the facts and condemns the demonstration. She pointed out that this tax existed even before the GST system was created.
What did Nirmala Sitharaman say about the removal of 18% GST on life and health insurance?
In reaction to revisions to the Finance Bill, 2024, she noted, "The tax on medical insurance existed before GST was implemented. It was already in place in every state. Did those who are now demonstrating talk about abolishing the tax in their own states?
"Recent demonstrations and remarks based on a news article alleging that the 'Centre had taken Rs 24,529 crores from health insurance premiums alone' are false and misleading. The 18% GST on health insurance comprises the 9% CGST and 9% SGST. Out of the total, Rs. 24,529 crores collected from health insurance during the last three years, half (Rs. 12,264 crores) went directly to the states as SGST and did not reach the Centre. Furthermore, around 41% of the Centre's portion of GST from health insurance is transferred to the states under the Finance Commission's tax devolution mechanism," she noted.
Responding to a query from media at the Parliament House Complex, Finance Minister Nirmala Sitharaman stated that a constitutional body, the GST Council, has been present to resolve any GST-related concerns. The body has complete authority to resolve complaints.
Sitharaman said, "Many suggestions have been made, and I will discuss them with the GST Council."
State's Share of GST Collections
Sitharaman stated that 73-74% of this money flows to the states. She noted that states wield enormous authority in the GST Council, which has two-thirds of the votes and may make decisions on such issues.
Why Are Policyholders Demanding the Removal of 18% GST?
The high GST rate on insurance premiums sometimes strains policyholders, making it less desirable to take out or expand coverage. Because insurance is generally utilized in emergencies such as death or hospitalization, policyholders may wind up paying high premiums and taxes without receiving immediate benefits.
GST Collection in the Past 3 Years
The GST on health and life insurance has generated around Rs 24,000 crore in revenue over the last three years.
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