In a letter to Union Finance Minister Nirmala Sitharaman, Road, Transport and Highways Minister Nitin Gadkari urged the removal of the 18 per cent Goods and Services Tax (GST) levied on life and medical insurance premiums.
According to Moneycontrol, the letter, dated July 28, highlighted the need for a priority review of this tax policy.
1. Gadkari’s direct appeal to Sitharaman
Nitin Gadkari, in a candid move, penned a letter to Finance Minister Nirmala Sitharaman, advocating for the removal of the 18 per cent GST on life and medical insurance premiums. He argues that the current tax framework is unjust as it essentially taxes the inherent uncertainties of life. Gadkari asserts that this policy not only discourages individuals from securing insurance but also stifles the potential growth of the insurance industry.
2. Burden on senior citizens
Gadkari highlighted the undue financial burden that the GST on insurance premiums places on senior citizens making it cumbersome for them to afford essential coverage. In his letter, he pointed out that the elderly, who are often on fixed incomes, face a disproportionate strain due to the high tax rate on products meant to provide them with security and peace of mind.
3. Social necessity of medical insurance
In his correspondence, Gadkari said that the 18 per cent GST on medical insurance acts as a deterrent to the growth of this crucial sector. He termed medical insurance as a “socially necessary” service suggesting that taxing it heavily undermines its accessibility and affordability, potentially leaving many without vital health coverage.
4. Nagpur Divisional Life Insurance Employees Union’s memorandum
The letter came in response to a memorandum from the Nagpur Divisional Life Insurance Corporation Employees Union, which outlined the pressing challenges faced by the industry. This union, representing Gadkari’s constituency, brought to light the adverse effects of GST on insurance premiums urging policy revisions to foster sectoral growth and consumer protection.
5. Taxing life’s uncertainties
Gadkari echoed the union’s sentiment arguing that levying GST on life insurance premiums equates to taxing life’s uncertainties. He suggested that individuals who proactively seek protection for their families should not be penalised with taxes on the premiums they pay, which serve as a safeguard against unforeseen life events.
6. Differential treatment in savings and deductions
The minister also touched upon the differential treatment of savings facilitated through life insurance policies. He advocated for the reintroduction of income tax deductions for health insurance premiums, which could incentivise more individuals to opt for coverage. Such fiscal incentives, Gadkari implied, could bolster both individual financial planning and industry stability.
7. Impact on the insurance sector’s growth
Gadkari’s letter pointed out the negative impact of the current GST regime on the insurance sector’s growth trajectory. The minister argued that the high tax rate discourages potential customers from investing in insurance thereby restricting the sector’s expansion and its capacity to provide comprehensive coverage options to a broader audience.
8. A call for public sector insurance consolidation
In addition to tax concerns, the minister sought the need for the consolidation of public sector general insurance companies. Gadkari suggested that a more streamlined and unified approach could enhance efficiency, competitiveness and service delivery ultimately benefitting policyholders and the industry alike.
9. Upcoming GST Council meeting
The GST Council, the authoritative body for determining GST policies, is scheduled to meet in August, following its last meeting on June 22. Gadkari’s proposal will likely be a significant point of discussion as policymakers consider adjustments that could alleviate financial pressures on citizens and stimulate sectoral growth.
10. Broader implications of Gadkari’s proposal
Gadkari’s call for GST withdrawal on insurance premiums reflects broader economic and social considerations. His advocacy highlighted the need for policies that balance fiscal responsibilities with the imperative of safeguarding citizen welfare. As the GST Council deliberates, the outcome could set a precedent for how essential services are taxed with potential ripple effects across the economy.
Link to article –
10 reasons why Nitin Gadkari wants GST on insurance premiums to be scrapped
