‘18% GST on health insurance is exorbitant, unheard of worldwide’

Visakhapatnam: Hailing the pleas made by Union Minister for Road Transport and Highways Nitin Gadkari and Union Minister for Consumer Affairs Prahlad Joshi, a veteran trade union leader from the insurance sector on Thursday said levying 18 per cent GST on health insurance premium is totally unjustified.

The two Central Ministers wrote separate letters recently to Union Finance Minister Nirmala Sitharaman requesting her to withdraw GST on insurance premium and take steps for consolidation of public sector general insurance (PSGI) companies. In July, in a welcome move, over 300 MPs present in Parliament cutting across party lines lent their support to the request of insurance employees to scrap GST on insurance premium.

According to the estimates of Swiss Re, India will become the sixth largest insurance market in the world by 2032. In 2021, the health insurance premiums in India increased by 22.5 per cent due to the impact of the Covid-19 pandemic. In 2022, when the economy recovered from the situation, the motor premiums also increased by about 2.9 per cent. GST at the rate of 18 per cent on health insurance and third party premium has become a huge burden on the social security that people provide for themselves! In terms of insurance penetration in 2022-23.

South Central Zonal Insurance Employees Federation (SCZIEF) president P Satish told Bizz Buzz, “GST was projected as a major tax reform initiated by the government aimed at doing good to the people and the nation at large when the Government of India rolled out the GST Bill from July 1, 2017. GST on essential items like food grains, pulses, vegetables and milk was fixed as zero. It is ironic that after food, clothing and shelter, insurance protection is an important need of the people,”

He said despite this fact, the GST on term insurance, health and ULIP policies was fixed at 18 per cent. The GST on new business premium including single premium of life and pension products was fixed at 4.5 per cent while GST of 2.25 per cent is fixed for renewal premiums and 1.8 per cent for single premium annuities.

Stating that it has become an impediment for the growth of the insurance industry, he said the policyholders had to shell out higher premiums on their insurance due to imposition of GST on their hard-earned savings. An average family with life, health and car insurance found to their dismay the steep increase on their insurance expenses due to the burden of GST.

Satish said there is 3 per cent GST on luxury items like gold, 0.25 per cent tax on engraved diamonds, whereas 12 to 18 per cent GST has been imposed on vital medicines, oxygen, 18 per cent GST on the insurance sector which provides social security and health insurance services to people! He further added, “18 per cent tax on social security is unheard of in any country across the world. It defies logic to tax exorbitantly on the savings of the people.”

Insurers have been mandated to follow the pattern of investment, as required under IRDAI (Investment) Regulations 2016. As on March 31, 2023, the investments made by the insurance industry stood at Rs 60.04 lakh crore as against Rs 54.36 lakh crore as on March 31, 2022, registering a growth of 10.44 per cent.

Satish pointed out that the share of life insurers stood at 91 per cent, general insurers including specialised insurers and StandAlone Health Insurers (SAHI) constituted 7.15 per cent and reinsurers including branches of foreign reinsurers constituted 1.85 per cent as on March 31, 2023. The share of LIC stood at 72 per cent and the private sector constituted 28 per cent in the same period. It goes without saying that LIC can provide more funds for the infrastructure development of the country, if the burden of GST is done away with.